The 27-year-old Mali international has signed a three-year deal after leaving Championship side Wolves.
Sako joined Wolves from St Etienne in 2012 and scored 36 goals in 118 appearances for the Midlands club.
Sako becomes Palace's fifth signing of the summer, after deals for Yohan Cabaye, Alex McCarthy Patrick Bamford and Connor Wickham.
He played a crucial role as Wolves were promoted to the Championship at the end of the 2013-14 season and was named in the League One Team of the Year.
Last year, he was the club's joint-top scorer with 15 goals, and featured in the Championship's best XI.
"I talked to some clubs but when I met manager Alan Pardew I felt a good feeling between him and me and that's why I chose Palace," said Sako.
"He plays attacking, attractive football so it should be good to play here and score some goals. That's why I came to join him."
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