During his medical on Thursday, Lafferty revealed he had been close to agreeing a move to Sicily from Sion in the last transfer window.
"I'm delighted to be here," he said.
"Palermo tried to sign me in January but unfortunately we couldn't close the deal. Now I can't wait to get started.
"When I was younger I watched a lot of Italian football and I know there's a very passionate fanbase here at Palermo."