He completed the loan move for 6m pounds, the club confirmed.
The Belgium international striker returns to Selhurst Park following a successful loan spell at the back-end of the 2018/19 season, where he scored six goals in 13 appearances for the Eagles.
He will wear jersey number 23 at Selhurst park.
Club Chairman Steve Parish said: "I am absolutely delighted to welcome Michy back to Crystal Palace. He is a player we’ve long admired, as well as being an immensely popular figure with everyone here during his last successful spell with us.
"With other top European clubs vying for his services it is immensely pleasing that Michy chose to come back to help us up the table as well as cementing his place in the Belgium squad for next summer's Euros."
Roy Hodgson added: "I am very happy we have secured Michy on a season long loan. He made a great impact at the club in his previous loan spell, albeit only five months long, displaying a goal scoring threat which we very much needed at that time and we are confident he will produce again.
"As a player who will help to convert our chances in to goals, Michy will be another valuable addition to the two new signings we have made this summer. It’s another boost for the players and fans alike, and I’m sure everyone will join me in saying welcome back Michy."
Batshuayi, who reclaims the Palace number 23 shirt, said: "I feel like I’m home now, so it’s good. But I need to do a good season here, to work a lot with my teammates and I want to do my best here.
"It’s not my first time here. I know the teammates, I know the gaffer, I know how the club works here. For me, it’s the best decision.
"I'm happy, the coach is happy, my teammates are happy. Let's get to work."
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