The former Socceroos star was a key player at Selhurst Park between 2001 and 2006, making over 120 appearances for the Eagles, and is looking forward to working with former teammate Dougie Freedman.
"It's nice to be back," he told the club's official website. "I know how Dougie thinks and how he sees the game, he knows Crystal Palace inside out."
Freedman added: "He is a good guy and he thinks the same of me in terms of what we can achieve at this club."
Former striker Freedman took over the role as Palace boss from George Burley on New Year's Day and currently has the Eagles sitting 21st on the English Championship table. They take on 16th-plaed Coventry City at Ricoh Arena on Saturday.