He has been at Palace since 2021 and had been linked with a move to Chelsea, who were reported to have activated his 35 million pounds ($44.74 million) release clause.
Palace chairman Steve Parish made the announcement of Olise's new contract on his Instagram profile.
"I'm absolutely delighted to announce Michael Olise has decided to commit his future to Crystal Palace football club and this afternoon signed a new four-year deal with the club," his post read.
Olise joined Palace from Reading for eight million pounds after scoring seven goals in 44 appearances in the Championship in the 2020-21 season. His performances saw him win the EFL Young Player of the Season.
At Palace the French youth international has made 71 appearances in all competitions and scored six goals. Palace manager Roy Hodgson (76) welcomed Olise's new deal.
"It's the best possible news we could have. The decision has been his (Olise's)," Hodgson said on the club website.
Olise missed Palace's 1-0 win at Sheffield United in their opening game of the season and will be out for a considerable period of time with a thigh injury according to the club.
