Goal reported on Thursday that Palace were on the verge of securing a new deal for the winger, who impressed under Tony Pulis last season.
Bolasie was in the final year of his contract but insists that remaining at Selhurst Park is a key part of his development.
"I am delighted I am here today with it all signed and I’m ready to kick on and play in the best league in the world,” the 25-year-old told the club's official website.
“I was aware there had been speculation about interest from elsewhere but I in my mind I knew it would be best for my development to stay here and play to the best of my abilities.
“Everyone has seen over the last two years that I have improved and improved and that’s what I want to do again this year.”
Palace could also be on the verge of signing QPR left-back Armand Traore after Harry Redknapp confirmed on Friday that the two clubs are in talks.
"We've had an offer from Palace, yes,” said the QPR boss.
"It's up to Armand, it's his decision whether he wants to go.
"We'll see what happens with that one, we'll see how it goes."