The 21-year-old was widely expected to agree personal terms with Chelsea and move to west London but instead has decided to sign a new four-year deal at Palace.
In a huge twist, the Eagles have successfully tied down their star winger who was top of Chelsea’s shortlist to boost their attack before the September 1 transfer deadline.
Steve Parish, Palace’s chairman, posted the news on Instagram, just minutes after Olise had signed the new contract.
His post said: “I’m absolutely delighted to announce Michael Olise has decided to commit his future to Crystal Palace football club and this afternoon signed a new four year deal with the club.”
Palace were unhappy with how Chelsea approached Olise but the Blues have insisted they did nothing wrong. The Eagles’ issues came with their belief that Olise’s £35m release clause was not straightforward and its conditions had not been met when Chelsea made their bid.
The south Londoners were dissatisfied by Chelsea’s approach coming through their previous relationship with the player, however it is unclear if they will take their complaints further.
The Stamford Bridge side are now seeking alternative targets, with Nottingham Forest forward Brennan Johnson joining Ajax’s Mohammed Kudus as a potential option.
Roy Hodgson will be delighted to keep Olise having lost Wilfried Zaha to Galatasaray already this summer. The Eagles were desperate not to lose both players in the same transfer window and could yet cash in on Olise next year, having awarded him a substantial pay rise with this new deal.
The winger is currently out injured after tearing his hamstring on France duty at the Under-21 European Championship. He is expected to be back playing at some stage in September.
Meanwhile, Liverpool want to sign Cheick Doucoure but Palace are desperate to keep their star midfielder.