Lotus said in a statement that he would attend all grands prix and F1 tests in 2015 and would drive in a "significant number of free practise sessions as well as contributing to the car's testing and development".
Palmer won the 2014 GP2 title with the most amount of points scored in a season (276) and the most consecutive points finishes (19).
Lotus's two drivers, Romain Grosjean and Pastor Maldonado, are also former GP2 champions.
"I'm delighted to be moving into F1 with Lotus this year as third driver and I'm very grateful for the opportunity they have given me," said Palmer.
"Lotus is a great opportunity for me particularly with Mercedes engines now."
Palmer's fellow countryman Hamilton, the 2006 GP2 champion, won the F1 world title last season for the second time.
(Writing by Tony Jimenez, editing by Pritha Sarkar)
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