The 27-year-old central midfielder has been the subject of a lengthy pursuit, with Ipswich seeing an opening bid of around €15m rejected before improving their offer in stages as Bayer Leverkusen held out for a fee closer to their €35m-40m valuation.
Sky Germany reports the two clubs have now agreed a package worth €30m, made up of €25m up front and €5m in bonuses, while other reporting puts the deal at €22.5m plus €5m in add-ons. Either way, Palacios has already agreed personal terms on a four-year contract running to 2030, and would become the first World Cup winner to play for the club.
Since leaving River Plate for Leverkusen in January 2020, Palacios has made well over 180 appearances for the Bundesliga club, scoring 15 goals and providing 17 assists, and lifted both the Bundesliga and DFB-Pokal during his time in Germany.
His arrival would give Gary O'Neil's midfield a considerably different profile to what Ipswich have relied on so far, following the club's earlier additions of Saša Lukić and Florentino Luís.
Ipswich Town have already moved a forward on in the other direction.
Ali Al-Hamadi has joined Sheffield Wednesday on a season-long loan, giving the Iraq international a fresh route back into regular first-team football after a modest loan spell at Luton Town last season, where he scored once in 13 League One appearances.
"I'm honestly really, really delighted to be here. You can't pass up an opportunity to play for a club like this," Al-Hamadi told the Sheffield Wednesday website.
He could make his debut for the Owls as soon as Saturday's home game against Bromley.
Between a marquee incoming deal and a squad player heading out on loan, the two moves capture the scale of Ipswich's rebuild since promotion: investing heavily at the top end of the market for proven international quality, while making room down the pecking order for players who need regular football elsewhere to keep developing.