Murray's original deal was set to expire next summer but having soared to the top of the scoring charts in the Championship, the 30-goal striker has been rewarded with a two-year extension.
The forward, 29, told the club's official website: "I'm delighted to get it all sorted. Obviously it's been mentioned a few months ago but now we've got to the end of it and signed, so yes, it's good news.
"I've got some real good memories here. Obviously this year's been a great year and Old Trafford in the League Cup stands out last year. Scoring 30 goals is something that I'm immensely proud of and the whole season has gone really well so far.
"I think we've been a little more attacking this year which has benefited me immensely and having Wilfried (Zaha), Yannick (Bolasie) and the guy in the pocket, and lately Aaron (Wilbraham) who's been playing up front with me, there's been a lot more support around me which has created more chances for me."
Palace boss Ian Holloway, whose side can clinch a play-off spot this weekend, added: "There's not many strikers around in my time who have got 30 in one season. Hopefully he can get a few more to get us up as well, so it's great news for the club.
"What he's done is phenomenal because with those two [Zaha and Bolasie] they beat people, you never know when the ball's coming in and his timing of how to get there, when to get there and his reading of what they do is quite exceptional.
"It's not just that, it's his work rate. He leads the line and how he brings other people into the game is as good as I've seen to be honest."
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