The 22 year old said: "I'm really glad the move's been completed. I'll hopefully start training with the lads and playing soon. I'm really looking forward to it.
"Dougie (Freedman) was a big part in me coming back, he worked really closely with me last time I was here. And, the Palace fans have always been good to me and while I've been away a lot were trying to contact me, which was great."
Co-chairman Steve Parish said: "We are absolutely delighted that James has decided to return for a second stint at Crystal Palace. It's a testament to Dougie and Phil's sheer persistence that we managed to get this over the line.
"This along with the signing of Jermaine (Easter) and others we are working on is a signal of how serious our intent is to start climbing the table.
"I look forward to seeing as many of you as possible to welcome James back at the Norwich game."