The 24-year old defender has penned a three-year deal with the Eagles for an undisclosed fee, believed to be around £1.5million, after passing a medical.
Right-back Kelly, who is a product of Liverpool's youth academy, departs Anfield after 62 senior appearances and is in line to make his Palace debut in this weekend's Premier League season opener against Arsenal at the Emirates Stadium.
"I'm over the moon," he told Crystal Palace's official website. "It was a lot of travelling to get down yesterday, but I'm glad to have signed and I'm looking forward to the weekend.
"I'd heard about a potential move at the start of the summer, but I just wanted to concentrate on playing again in pre-season. I played a lot of games, which is what I needed. I've been out, fit, but not playing competitively all of last season.
"Now is the time at my age where I need to get back to playing week-in week-out. I'm looking forward to playing under Tony [Pulis] and playing regular football again.
"The fans are massive at any club - they were brilliant at Liverpool - and they seem brilliant here.
"But I've looked around the training ground and all the posters on the wall are about the team. That's what I want, to play for a team."
Crystal Palace FC (@CPFC) August 14, 2014
For breaking stories and all the great banter like us on Facebook: facebook.com/tribalfootball