Added competition for a first-team spot saw the winger miss out on a place in the 18-man matchday squad at West Bromwich Albion on Saturday.
The 27-year-old now moves to south London on a temporary basis in order to seek regular top-flight football.
Puncheon will not be allowed to face his parent side when Palace visit St Mary's next month, nor will he be able to feature when Saints travel to Selhurst Park next March.
This move sees the wide-man link up with Eagles manager Ian Holloway, who he played under during a temporary spell at Blackpool during the latter half of the 2010/11 season.
That stint in the north-west was one of three previous loan switches Puncheon has made during his time at St Mary's, having originally joined Southampton in January 2010 while the Club was in League 1.
Later that year Jason joined Championship side Millwall on a temporary basis, scoring five goals in seven games to earn a subsequent move into the Premier League with the Tangerines.
Despite impressing for the Tangerines, Holloway's side were relegated and Puncheon then moved on to another top-flight outfit, Queens Park Rangers, in August 2011.
After an unsuccessful spell in west London, Puncheon worked his way back into contention with Saints, who by then were well on their way towards promotion to the Premier League.
He made 32 appearances in the top flight last season, scoring six goals, including vital strikes in wins over Aston Villa, Reading and Manchester City, as well as the equaliser in a 2-2 draw away at then-European champions Chelsea that would later win him the 2012/13 Goal of the Season award.