The former Ipswich, Charlton and Newcastle playmaker joins on a two-year contract with the option for a third, making him new boss Lee Clark's fourth signing this week.
"I'm absolutely delighted and buzzing at the moment," Ambrose said.
"I can't wait to get going. It's been a hectic few days to get it done but this is a positive move for myself at this point in my career and I can't wait.
"Hopefully we can improve as a team on last year and go one better."
Ambrose started his career at Ipswich before earning a big move to Newcastle in 2003, where he scored five goals in 37 Premier League games over two seasons.
He then signed for Charlton, where he stayed for four seasons apart from a short spell back on loan a Ipswich.
After that came his spell at South London rivals Palace, where he arguably found his best form, scoring 30 Championship goals in 130 appearances.
Ambrose made 10 England U21 appearances but failed to step up to the senior side.