The Belgian national group, 25, had been on advance for a season in the Valencia League.
Batshuayi, who had been connected with an advance move to Tottenham or Everton, scored seven objectives in 32 Premier League appearances for the Blues.
“This is a fabulous mark for Crystal Palace,” club president Steve Parish said.
“Michy is a player we’ve respected for quite a while, and I’m glad that we at long last figured out how to get in a red and blue shirt, which will be an incredible expansion to our group.”
Chelsea marked Batshuayi for £ 33.2 million Marseille in 2016, and scored the unequivocal objective for Chelsea Premier League title triumph for 2016-17.
He went through the second 50% of keep going season on advance at Borussia Dortmund, where he scored multiple times in 14 recreations.
He scored an objective in 15 association diversions for Valencia this season.