The striker's contract had expired but after impressing under Tony Pulis as the Eagles avoided relegation, the former Arsenal man has earned improved terms at the club
The Morocco international was lured to Selhurst Park by Ian Holloway in August 2013, having been unable to nail down a starting spot at Arsenal.
In 34 appearances in all competitions, Chamakh scored six times as he contributed to an impressive second half of the season under Tony Pulis' tutelage.
The former Bordeaux man, 30, is now under contract until 2016 and is eager to build on their promising season last time out.
"My first choice would be to continue my adventure with Crystal Palace. My priority is to stay here," he told Palace Programme in May.
"The adventure here is not over. We've had a good season and built something really, really strong. I hope that will continue.
"I've played more football this year and that's why I came here. It was a challenge to play regularly, to enjoy my football and have fun again.
"I lost that before, so it was really important for me to find that emotion again. I needed that, I wanted that and I am so happy."