Sakho, 27, spent the second half of last season on loan at Selhurst Park, and although his time with the Eagles was cut short due to injury he still managed to leave a lasting impression on those in south east London.
The former Paris Saint-Germain captain was a colossal figure in the Palace backline and was Frank de Boer's side's top target throughout the summer, though they were reluctant to meet Liverpool's asking price for the talented but unorthodox Frenchman.
"Crystal Palace have completed the permanent signing of Mamadou Sakho from Liverpool on a four-year deal for an undisclosed fee," a statement read on the Eagles' official site.
Leicester City and West Bromwich Albion were also interested in prising Sakho away from Anfield, according to the Liverpool Echo, while Stoke City were also credited with an interest earlier this summer.
But Sakho's preference was always to return to Palace, who in the end stumped up the cash as Liverpool remained stubborn over their reported £30m asking price, though they softened somewhat towards the end.
Manager De Boer recently said a deal for Sakho was "far too expensive" for the Eagles, but the need to bring in the popular centre-back was heightened significantly by their wretched start to the new campaign.
Palace saw an offer of £22m plus add-ons rejected by Liverpool earlier this week as the Merseysiders attempted to squeeze as much out of the proposed deals as they possibly could. Sakho travelled to London to undergo a medical and thrash out personal terms on Thursday (31 August), and now stands as Palace's second most expensive signing, eclipsed only by Christian Benteke. The Frenchman will likely make his second debut for the Eagles against Burnley after the international break.
The Reds have done remarkably well to sell Sakho, whose last appearance for the club came almost 18 months ago, for close to £30m, though they will still rue their failure to capture top defensive target Virgil van Dijk from Southampton.