The South London side announced the deal four-and-a half hours after the domestic transfer window after being granted an extension.
After confirming the move the Palace boss said: 'I'm very happy that the club has managed to acquire the signature of Jack to join us and compete for a place amongst our goalkeepers at the club. Jack is a player that I worked with for four years at England.
'His last game for me as England manager was a very unfortunate one where he broke his ankle and that cost him his place in the 2016 Euros. But I've always believed in Jack's potential.
'I am aware that his last spell at Stoke hasn't been the happiest one for him but I sincerely believe that with his qualities, coming to a new club will enable him to resurrect his career and show once again what a good goalkeeper he is.'
Butland's arrival sees Angus Gunn move the other way to the Bet365 Stadium on a season-long loan.
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