The 24-year-old winger has been with Palace since January 2022, joining from American University side West Virginia before going on to make ten appearances in the Women's Championship in the remainder of that season.
The following campaign saw Sibley largely absent after an ACL injury but, after recovering from that, she signed a new deal before being part of the squad last season that saw her club win the second-tier title and promotion to the Women's Super League.
On signing for the club, Sibley said: "I'm delighted to have got this signed, sealed and delivered before the season starts.
"The Championship is a tough league, but with the ambitions of the club and the fans' backing, I think it's going to be a great season for everybody.
"When I got off the train and walked around the city centre I was amazed by all the Newcastle shirts, and then when I visited St. James' Park it was pretty surreal walking down the tunnel and seeing the stadium. I'm excited to play the two games that we have there, as well as the games at Kingston Park, and playing in front of this great fanbase. I can't wait to get started now."
Manager Becky Langley added: "Issy is a creative player who we have been interested in since last season. She's fast, she's technical and her personality and drive match our ambitions at Newcastle United.
"Her loan move will be good for her development and again, will further strengthen our positive relationship with Crystal Palace. We are very excited with Issy's potential."