The three-year deal for the Algeria international was announced over 12 hours after the transfer window had closed but, because part of the deal was in place before the 2300 BST deadline on Monday night had elapsed, the move was sanctioned.
Guedioura, 27, had spent a year-and-a-half at the City Ground after initially moving across the Midlands on-loan from Wolves.
He signed a permanent deal at Forest last summer and impressed for much of the season and is renowned for his long-range shooting ability.
Palace manager Ian Holloway, who saw his side collect their first points of the Barclays Premier League season with victory over Sunderland on Saturday, had already completed deadline day deals taking Jack Hunt, Adrian Mariappa and Barry Bannan to the club, with Cameron Jerome joining on-loan from Stoke later in the evening.
They join Stephen Dobbie, Dwight Gayle, Jerome Thomas, Jose Campana, Kevin Phillips, Elliot Grandin, Marouane Chamakh, Neil Alexander, Florian Marange and Jason Puncheon through the doors at Selhurst Park as Holloway looks to build a team capable of achieving Premier League survival.