The Morocco international joins in a permanent transfer, having spent last season on-loan with Real Betis.
Riad has signed a deal to 2029 with the Eagles.
Palace chairman Simon Parish said: “As a full international at just 20-years-old, Chadi is an exciting young player who we are delighted to be able to welcome to the club.
"His arrival adds quality to a squad already packed with talent and potential, and I look forward to seeing him contribute to the team this season and beyond.”
Riad added: “I’m really happy to join Crystal Palace. I was interested in coming here because of the history of the club, and the league in which it plays. They have been telling me how they played this year and I think it complements perfectly the way I play.
“The club has high-level players who are young and I have come here to follow their same trajectory, to grow as they have grown.”