Gayle, 22, joined Peterborough on loan from League Two side Dagenham & Redbridge in Novemeber 2012, with the Posh given the option to make the deal permanent in January.
On 2 January 2013, Peterborough exercised their £500,000 option on the former Arsenal youngster, signing him to a four-and-a-half-year deal.
However, the Posh have decided to cash in on Gayle following their relegation to League One, and understandably so.
According to reports, the deal could be worth up to £8.5 million, including add-ons.
The 22-year-old striker scored 13 goals in 29 league appearances for Peterborough United last season.
The delighted Gayle, who has put pen to paper on a four-year deal Selhurst Park, is looking forward to working with Palace boss Ian Holloway next season.
“I’m ecstatic really. I just want to get pre-season started now,” said the 22-year-old attacker.
“The chance came and I had to grab it because I might not get another chance. To be playing in the Premier League from where I’ve come from is a big achievement really.
“I’m just really looking forward to it and hopefully I can take the opportunity with both hands and do well.
“Ian Holloway is good manager and for him to point out my talent and my ability is a good feeling. I just hope I can repay him with goals for the club and help them stay in the Premier League.
“He’s built a very attacking side, which is what you need really. You need to score goals to win games to keep you up and to win trophies, which he proved last season.”
Holloway, who failed to keep Blackpool in England’s top-flight in 2010/11, has his work cut out for him as the Eagles are projected, by the bookmakers, to be bottom-of-the-table next term.
Mannone to Sunderland
Sunderland A.F.C. have completed the signing of goalkeeper Vito Mannone from Arsenal for an undisclosed fee, Sky Sports reports.
Mannone, 25, will replace Liverpool-bound shot-stopper Simon Mignolet at the Stadium of Light after signing a two-year deal with the Black Cats.
The former Italy youth international, who joined the Gunners from Atalanta B.C. for a fee of £350,000 in 2005, kept three clean sheets in nine league appearances for Arsenal last season.
“Sunderland’s potential is incredible. I have come from a big club but, to be honest, I don’t see any difference in the facilities. From what I can see on my first day they are brilliant,” said Mannone.
“To have good facilities where you can work and improve is something every club wants to achieve. The base is there and I am really happy to be here.
“I waited a long time for an opportunity like Sunderland, and for me it is a great one. I’m very excited. I am here to work hard and to show what I can do.”