Both teams announced that the trade had been finalized Monday afternoon.
Palmer failed to get Oakland to the playoffs in 2011, falling one game short, then the Raiders regressed and went 4-12 this past year. With Palmer owed $13 million for this season and the Raiders in rebuilding mode, general manager Reggie McKenzie decided to get a quarterback he was familiar with from his time in Green Bay.
"Matt is a tough football player, and a talented quarterback," McKenzie said. "He will get the opportunity to compete to be a starter with the Raiders. I believe Matt has that potential, but I also know he hasn't had enough experience. We're going to let him compete and battle, and see what happens."
After showing promise as a backup with the Packers, Flynn signed a three-year, $26 million deal with the Seahawks but failed to beat out rookie Russell Wilson for the starting job and quickly became expendable.
A league source told Schefter that Flynn has agreed to restructure his contract.
The new deal increased his 2013 base salary from $5.25 million to $6.5 million -- all of which is now guaranteed. In the second year, Flynn's base salary drops from $6.25 million to $5 million flat. The contract also has incentives and escalators that can bring value up to $15.25 million, the source said.
Flynn, a backup in college at LSU to former Raiders quarterback JaMarcus Russell, has started just two games in five seasons as a pro. But it's those brief appearances that intrigue many NFL teams.
He threw for 251 yards and three touchdowns in a loss at New England in place of an injured Aaron Rodgers late in the 2010 season. He then started the regular-season finale the following season, going 3-for-44 for 480 yards and six touchdown passes in a 45-41 win over Detroit.
Flynn was drafted by the Packers in the seventh round in 2008, when McKenzie worked in the Green Bay front office. He has throws 141 passes in his career, completing 87 for 1,083 yards, nine touchdowns and five interceptions.
The Seahawks must now look for another backup either in free agency or the draft. In addition to Tyler Thigpen, the Seahawks are also considering Matt Leinart as possible backup quarterbacks for next season, sources told ESPN.
"There's different avenues we can go," general manager John Schneider told 710ESPN Seattle. "We have a plan in place and it's contingent on who that player is. There are veterans who are available now, some very talented guys. Guys who are all football. ...
"There are also some guys in the draft we think are pretty interesting. We have a plan and we're going to take it as it comes."
Since dealing a 2012 fourth-round pick to Washington during the 2010 draft for Jason Campbell, the Raiders have committed up to six draft picks on quarterbacks with no proof they have found the right man for the job.
Oakland used a 2012 third-round pick to take Terrelle Pryor in the supplemental draft in 2011; dealt the two high picks for Palmer after Campbell got hurt in October 2011; and now have made the deal for Flynn.
If Flynn beats out Pryor for the starting job, he will be the 16th quarterback to start for Oakland since the beginning of the 2003 season. Campbell is the only one of those to have a winning record as a starter, going 11-7 in his two seasons.
The only other quarterback currently on Oakland's roster is Pryor, who showed a few signs of being able to play in the NFL in his first full pro season. Pryor got in for a few plays late in the season before starting the final game at San Diego with Palmer sidelined by cracked ribs and a bruised lung.
Pryor went 13-for-28 for 150 yards, two touchdowns and an interception in a 24-21 loss to the Chargers. He also ran for 49 yards and a score and looked more than capable running the offense.
Palmer put up prolific numbers in his first full year as a starter in Oakland, but that led to little success for the team. He completed 61.1 percent of his passes and threw for 4,018 yards in 15 games -- second-most ever for the Raiders -- with 22 touchdowns and 14 interceptions.
But with McKenzie overhauling most of the roster he inherited when he took over the organization last January, he apparently had little need for a 33-year-old quarterback. The Raiders will save about $6 million on this year's cap when Palmer is moved.
If he goes to the Cardinals, Palmer is expected to take a pay cut. He would likely become the starter for a team that has been searching for a replacement for Kurt Warner the past few years.
Information from ESPN NFL Insider Adam Schefter and The Associated Press was used in this report.