Palace gave Freedman permission to hold talks with Bolton on Monday and he has now agreed to move to the Reebok Stadium to replace Owen Coyle.
A statement from the Eagles read: "Crystal Palace Football Club can confirm that first team manager Dougie Freedman has joined Bolton Wanderers.
"The board of the club would like to put on record their thanks to Dougie for all his efforts over the past couple of years and their disappointment over the events of the past few days .The search for a replacement starts immediately.
"The team at tonight's game against Barnsley will be taken by assistant manager Lennie Lawrence and first team coach Curtis Fleming."
Freedman was appointed Palace manager in January 2011 when replacing George Burley and steered the club clear of relegation.
Last season he took Palace past Manchester United and into the semi-finals of the League Cup, establishing a reputation as one of the most promising managers outside of the top flight.
He leaves Palace in fourth place to take over a Bolton side currently down in 16th in the Championship.