Lee worked with Allardyce, who was sacked as England manager in September following a newspaper sting, at the national team and also before that at Bolton Wanderers. He left the England set-up in December.
"I am looking forward to once again working with Sammy," Allardyce told the club website (www.cpfc.co.uk) after Lee's appointment as assistant manager.
"It was great working with him at Bolton and is someone who has a wealth of experience both at club and international level over the years as well."
Allardyce was appointed Palace manager on Dec. 23 on a 2-1/2 year contract, replacing the sacked Alan Pardew. The South Londoners are currently fourth from bottom, a point clear of Sunderland and Swansea City.
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(Reporting by Alan Baldwin, editing by Pritha Sarkar)
