The clubs agreed a fee of around £26m on Thursday afternoon.
And in the early hours of Friday morning they revealed a deadline-busting deal for the centre-back has finally been completed.
Sakho, 27, has put pen to paper on a four-year contract at Selhurst Park, where he spent the second half of last season on loan.
The switch comes after a summer of uncertainty for the France international, who had been deemed surplus to requirements by Liverpool boss Jurgen Klopp.
Sakho revealed his delight about the move, saying: "I loved the challenge last year; it was difficult but beautiful and it’s why this summer I thought that Palace was the best choice.
"I am really happy to be here because I have some friends here. I still keep in touch with Christian, Wilf, Bakary and Yohan Cabaye, as well as Jason Puncheon. We had a really good ambiance last year and so we still speak to each other."
Sakho explained how far he’s come on the road to recovery after his previous Palace stint was ended by a knee injury.
He said: "I feel really good and trained really hard to try to come back at 100% level.
"I am still having treatment and I’m starting to train again, so we’ll see with the doctor and the physio how far away I am to starting a full game."
Sakho also vowed to knuckle down for Palace when he returns to action.
He added: "I am really excited about playing for the Palace fans again, but in football the past is the past and you need to think about today and tomorrow.
"Last year we did a good job and we need to prove that again and have a good objective. If we put all of our power together, we will have a great season.
"I think we also have a really good manager [Frank De Boer] with a lot of experience. He has a new football mentality and we have a great squad so we just need to work hard, and I think that everything will be better soon.
"I fought for PSG for many years and was proud to do that, and I did that as well for Liverpool. Today is a new story for me; I will start to fight again for Palace and I’m proud at the same level. Whatever shirt I wear I give 100%, and I will try to give my best here."
