Bolasie was in the final year of his contract, but has penned fresh terms to hand Palace fans a further boost following the end of the search for Tony Pulis' successor this week.
Neil Warnock has returned to Selhurst Park for a second stint in charge and Bolasie will be keen to hold down a first-team place under the no-nonsense Yorkshireman.
Democratic Republic of Congo international Bolasie, 25, joined Palace from Bristol City in August 2012 and has made 79 appearances for the London club, helping them clinch promotion from the Championship and stay in the top flight.
Warnock, meanwhile, could be on the verge of making his second signing as Palace have tabled a bid for QPR defender Armand Traore.
Traore has started in the club's opening two games of the new Premier League season.
QPR boss Harry Redknapp confirmed on Friday: "We've had an offer from Palace, yes.
"It's up to Armand, it's his decision whether he wants to go.
"We'll see what happens with that one, we'll see how it goes."