The midfielder has moved to Selhurst Park on a three-year deal and will play under Ian Holloway for the second time, after they achieved promotion together at Blackpool.
The Scotland international follows Reading defender Adrian Mariappa to Selhurst Park on transfer deadline day, with Ian Holloway hopeful of completing further deals. Bannan, meanwhile, is now due to meet up with the Scotland squad ahead of World Cup qualifiers against Belgium and Macedonia.
“I went back home to Scotland over the weekend ahead of meeting up with the international squad, so I've had to travel back down, but it's a great bit of news for me," Bannan told the Crystal Palace official website. “I was at Blackpool with the gaffer here when they got promotion that year, and that was probably the highlight of my career so far.
“It is a big move for me to leave Villa, and I would like to thank the fans there, but it's a new chapter in my life now and I can't wait to get started.
“I want to get myself in the door and start training and hopefully get myself in the team. I haven't played this season and didn't much last year, so I can't wait to get going.”