Palmer, from South Shields, has opted to sign for his hometown club ahead of the forthcoming Northern League Division One season.
The 26-year-old has been a regular source of goals from midfield in his career so far.
He scored 18 times in Division One last season - six of them at Bishop Auckland, for whom he played between August and December.
Palmer had spent the previous season with Seaham, scoring 20 times in the league as they romped to the Division Two title.
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He now says he is “over the moon” to link up with Jon King’s newly-promoted Shields side.
Palmer said: “What is happening at Shields at the moment is really big, so to be part of it is going to be really good. I’m over the moon.
“The club wants to progress and everyone is talking about that, so to be part of something like that would be great.
“I’m really looking forward to getting to know the lads, and hopefully hitting the ground running with a good pre-season.”
Palmer mostly plays as a central midfielder, although he can also play on the right.
Last season, he helped Seaham to an impressive ninth-placed finish in their first season back in Division One.
He added: “I’m a bit gutted to leave Seaham, because I loved playing for them.
“There are big things going on at Shields, though, and I couldn’t say no to this opportunity, especially with me being from the town. All of my friends and family will be able to watch me and I had to go for it.
“The club is going places and I can’t wait to get started.”