Palhinha is Fulham's first new arrival since the west London club clinched promotion from the Championship last season.
The 26-year-old agreed a five-year contract, with the club holding the option for an additional 12-month extension.
"I'm very glad to be here. It's a big opportunity for me, for my career, to play in what is -- in my opinion -- the best league in the world," Palhinha said.
"I've signed with a great club. The club wanted me, and I chose the club, so I promise the fans that I will do my best, and I hope we can win so many things in this season."
Cottagers vice-chairman Tony Khan added: "Joao Palhinha has excelled in Portugal playing both club and international football. He's been one of our top targets in this window.
"While there were other prominent clubs aiming to secure his signature, we're thrilled that Joao chose to come here and that he wants to play for Fulham under our great coach Marco Silva."
(For more sports news and updates, follow Ahram Online Sports on Twitter at @AO_Sports and on Facebook at AhramOnlineSports.)