Ebiowei has made five substitute appearances under Patrick Vieira this season but Palace believe more regular football in the Championship will help his development.
A host of Championship and League One clubs have been interested in Ebiowei but he is set to move to Hull.
Their manager Liam Rosenior said: “Malcolm has turned down a lot of clubs in the Championship to come here.”
Ebiowei enjoyed a breakthrough season under Wayne Rooney at Derby last season, playing 16 times in the second half of the campaign as they were relegated from the Championship.
Rooney praised Ebiowei, who has represented both England and the Netherlands at youth level, and said the teenager “has got a really bright future”.