The 22-year-old, who has missed much of the season with injury, has agreed to join Ian Holloway's promotion-chasing Championship side on a temporary deal until February 19
The 22-year-old joined the Chris Hughton's Canaries from Barnsley in the summer, but has only featured three times for the Premier League side this season after recovering from a long-term knee injury.
Palace manager Ian Holloway, who is short of numbers in midfield, was forced to make additions to his squad this month as they to continue their push for promotion.
The one-time England Under-21 international will be eligible to play in Saturday's Championship game against Bolton, where he spent an eight-game loan spell earlier this season.
Butterfield played the final 18 minutes of the Canaries’ 3-0 FA Cup win at Peterborough on January 5, his last appearance for Norwich.