The 29-year old former Houston Dynamo and Portland Timbers defender/midfielder experienced an up and down season personally at RSL, making 17 appearances as a fill-in at both left and right-back, and follows former assistant CJ Brown to the Fire after he was appointed last week.
Palmer told the club's official website that he was looking to forward to again working with Brown who is a legend in Chicago.
"I'm elated to continue with CJ," said the Jamaican. "He's a guy that I have a lot of respect for and he appreciates and respects my game.
"I'm looking forward to working with him again as well as (head coach) Frank Yallop in Chicago. Hopefully we'll try to create what we had in Salt Lake or even something better."
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