West Bromwich Albion were also known to hold an interest in the left-sided player but after being appointed as the new boss of the Eagles, Sam Allardyce has moved to make his first new signing.
Palace have revealed that Schlupp has been given a four-and-a-half year deal at Selhurst Park, and Allardyce has acknowledged that he is delighted to complete the transfer of the 24-year-old.
Allardyce told the club's official website: "I am delighted we have been able to secure Jeffrey's services, he is a player I have admired for some time and is a talented and athletic player.
"He will bring strength and experience to the defence and will be a major asset for the club having just turned 24 years old."
Schlupp leaves Leicester having scored 15 goals from 150 appearances in all competitions.