Mateta, who has scored seven goals in the Bundesliga this season, is due to have a medical in London on Wednesday.
Palace have an obligation to make the deal permanent for a fee of around £13million.
Roy Hodgson is keen to bolster his attacking options this month and Mateta, 23, will provide competition for Christian Benteke.
The arrival of Mateta could pave the way for Benteke to leave Palace in the summer. The Belgian has managed just three goals this season and his contract expires at the end of the campaign.
Palace have lacked firepower again this season. Jordan Ayew has scored only one goal and Michy Batshuayi has failed to find the net since re-joining on loan from Chelsea.
The Eagles have already made a space in their squad for a new signing after releasing Max Meyer from his contract early.