The team say he will drive in “a significant number” of practice sessions during the year.
Lotus chairman Gerard Lopez described Palmer as “a fantastic talent and a very credible driver to fulfil the role of third driver at Lotus F1 Team”.
“Romain [Grosjean] and Pastor [Maldonado] are both GP2 series champions, so we know what a fantastic proving ground GP2 provides.”
Palmer tested for Force India at the end of last year after his title win.
“My goal has been to become a race driver in a competitive F1 team for 2016 and Lotus F1 Team is a great opportunity for me, particularly with Mercedes engines now,” he said.
“To be able to learn with a major F1 team by working closely with them in every area and getting a lot of mileage in the car is the best way possible, as Valtteri Bottas proved.”
View the updated list of 2015 F1 drivers and teams
2015 F1 season
- How a secret Mercedes engine mode helped pressure Vettel into a race-ending puncture
- Over 100 driver penalties issued in record-breaking 2015
- Part-time racer? The facts of Hamilton’s ‘jet-set lifestyle’
- A unique atmosphere: Going to the Italian Grand Prix at Monza
- The Complete F1 Fanatic 2015 season review