The deal for the Frenchman, who has scored 10 goals this season including seven in the Bundesliga, comes with an option to buy.
"Playing in the Premier League was my dream when I was a child," the 23-year-old told the Eagles website.
"I spoke with Roy Hodgson on the phone. He spoke French - good French. This manager is a good trainer."
Mateta will give Hodgson another option in attack and the former England manager will hope he can have an impact on a side who have struggled for goals this season.
The south London side have a number of senior players entering the last few months of their contracts and have already made a space in their squad following Max Meyer's release this month.
He explained the differences between French and German football and how he is approaching the English top-flight:
"Germany is very intense, every time pressing high. In France it's more calm, more technical I think in Germany's it's more intensive – you run a lot.
"I have some friends who play in the Premier League and say it's very intense physically. It's hard but I will see!"
Need a VPN? Or seeking to switch? Then support Tribal Football by clicking here to sign up with our official partners NordVPN. Not only will you receive the best VPN experience, but also great discounts by signing up via Tribal Football. Thanks for your support!