Birmingham City have signed midfielder Wilson Palacios on loan from Olimpia.

The Honduras international will initially join the Barclays Premier League club on loan until the end of December, with an option to make the deal permanent until 2010 plus a two-year option.

The 23-year-old was brought to the attention of Steve Bruce by Arsenal boss Arsene Wenger.

Wenger gave the player a trial at Arsenal, but despite being impressed by what he saw, decided not to go ahead with a deal because he already has eight midfield players at his disposal.