Norwegian forward Strand Larsen completed his move late on transfer deadline day on Monday (local time), making him the London club's second big buy of the window after they paid Tottenham Hotspur $69 million - at the time a club record - for Brennan Johnson.
However, they lost captain Marc Guehi to Manchester City in January.
Strand Larsen scored 14 goals in his first season at Wolves after moving from Celta Vigo in 2024 and has continued to look sharp this season, though goals have been sparse in a struggling side.
Palace said he has signed a four-and-a-half-year contract.
French international Mateta, who has been wrestling with a knee injury, had an initial medical examination with Milan on Sunday, but after additional tests on Monday, the Italians pulled out of the deal, reported to be about $60 million.
On a low-key deadline day, Liverpool agreed a $120 million deal for 20-year-old centre back Jeremy Jacquet, but he is set to stay with French club Rennes until the end of the season.
Manchester City went big again in the transfer window and will hope it reaps more rewards than last year.
City were the biggest spenders as Premier League clubs dominated the mid-season window, splashing out a reported $165 million on Antoine Semenyo and Marc Guehi to boost their four-pronged trophy pursuit.
Last year City spent more than $287 million in a bid to salvage their campaign but still ended up empty-handed for the first time in eight years.
City's outlay in this window was less but still represented a big chunk of the spending from England's top flight, which was about $718 million, according to stats website Transfermarkt.
Premier League clubs outspent their rivals in Spain, Italy, France and Germany.
Atletico Madrid have signed Nigeria forward Ademola Lookman from Atalanta for about $60 million, which will make him the first English-born player to have played in the Premier League, Bundesliga, Serie A and LaLiga.
