Premier League club Palace have announced on their official website that Clyne has signed a short-term contract with the Eagles.
The 29-year-old right-back started his professional club football career at the London club and came through their youth academy.
The England international played 137 matches in all competitions for Palace between 2008 and 2012 before making the switch to Southampton in 2012.
The defender earned the move to Liverpool to 2014, but injuries and competition for places saw him struggle for playing time in his final years at the Merseyside club.
Clyne told Palace’s official website: “I’m a London boy, this is where I grew up. I’m back home and all my family and friends are here. It’s surreal being back, enjoying it and hopefully I can just crack on and enjoy my football again.”
Palace chairman Steve Parish said: “Nathaniel is a fantastic character to have around this squad and we are delighted to secure his services for the upcoming period.
“He is a first-rate professional, just as he was when I first met him more than a decade ago. His presence and experience will be invaluable.”