The 24-year-old, who came through the ranks at Leicester after joining the club's academy at a young age, moved to Crystal Palace in January in a bid to enjoy a regular playing time.
Schlupp played against his former club in a 2-2 stalemate in the Premier League last weekend and was replaced by Patrick van Aanholt on 69th minute.
"It doesn't matter now what I wanted to do, the club made the decision" Shakespeare was quoted as saying by Leicestermercury.co.uk.
"He was a player I had a lot of time for in the past. He was a home-grown, coming through the academy, and he was well liked in the group. But he has moved on now and it's good to see him playing regular football, which he wanted.
"It is Palace's issue now and problem how to get him playing consistently. Hopefully, he will get that chance at Palace," he added.
Schlupp has made ten appearances, including six starts since joining Palace and he is likely to start next weekend when they lock horns with Liverpool at Anfield.