The striker has been in red-hot form this season, scoring 30 goals in all competitions, and that was enough to earn him a two-year extension to a deal that was due to expire at the end of next season.
Murray managed seven goals in his first season at Selhurst Park - he was a free transfer signing from rivals Brighton in 2011 - but 2012-13 has been his most prolific season by far and his 29 Championship goals have him two clear of Jordan Rhodes in the race for the Golden Boot.
He told the club's official website: "I'm delighted to get it all sorted. Obviously it's been mentioned a few months ago but now we've got to the end of it and signed, so yes, it's good news.
"I've got some real good memories here, obviously this year's been a great year and Old Trafford stands out last year. Scoring 30 goals is something that I'm immensely proud of and the whole season has gone really well so far.
"I think we've been a little more attacking this year which has benefitted me immensely and having Wilfried (Zaha), Yannick (Bolasie) and the guy in the pocket, and lately Aaron (Wilbraham) who's been playing up front with me, there's been a lot more support around me which has created more chances for me."
Eagles manager Ian Holloway said: "There's not many strikers around in my time who have got 30 in one season, hopefully he can get a few more to get us up as well, so it's great news for the club.
"What he's done is phenomenal because with those two [Zaha and Bolasie] they beat people, you never know when the ball's coming in and his timing of how to get there, when to get there and his reading of what they do is quite exceptional.
"It's not just that it's his work rate, he leads the line and how he brings other people into the game is as good as I've seen to be honest."