Luke, who can play at left-back or centre-half, spent the majority of last season on loan at St James Park where he played 20 games starting 17 games.
Speaking about making his move to Exeter permanent, 22-year-old Luke said:
I am delighted. Last season, when I was on loan, I really enjoyed my time here and the environment of the club and the management and the players is what made we want to sign.
It was something that was spoken about at the back end of last season as I knew I was leaving Palace. There were options on the table but it was just about playing where I felt I was going to progress the most.
We gave promotion a good go last season and I think we were quite unlucky, but I feel we have got the players and the staff to push forward again.
It wasn’t that tough of a decision (to join Exeter) as even at the back end of last season when I wasn’t playing that much, I still wanted to stay at Exeter. I am really excited and I can’t wait to get back on the pitch.