The England midfielder has extended his deal to 2033.
"I’m buzzing about the new contract, as you can probably tell!" Palmer told the club's website. ‘The smile hasn’t left my face and I’m just really happy about it.
"Since the first day I walked in the building, I’ve felt really good here. I’ve felt settled and now to know I’m going to be at Chelsea for a long time means a lot to me.
"Everyone knows it was a big move for me when I came last summer. I’d been at one place all my life, but I wanted to have a new experience, I can look back at it now and know it was the right decision. I’m happy I made the move and I’m just loving life here at Chelsea.
"The season just gone, for me personally, was amazing. I felt trusted in the team and I really enjoyed playing. It makes me excited for the season ahead and I think collectively, we can do some really good things this year."
On new manager Enzo Maresca, he added: "I always get that buzz when the Premier League starts again and we’re heading into the new season in great spirits. We’ve got an exciting manager, an exciting team, and I’m just really looking forward to getting underway.
"We’ve got a really talented young squad. It’s exciting to be a part of. We’ve got good players and that’s what you want, to be around good players to help you develop.
"I’ve known the gaffer for a few years and it’s great to work with him again. He’s an amazing coach and he goes into so much detail, so I think it can only benefit us as a team. He’s a great guy as well, so I’m really looking forward to working with him."