The former Chelsea defender called time on his 21-year association with the Stamford Bridge club this summer when his contract expired.
Terry made 690 appearances in total for Chelsea, scoring 65 goals, as he won five Premier League titles, five FA Cups, three League Cups, the Champions League and the Europa League.
However, he has now moved down a division in search of even more silverware, and he is relishing the challenge.
“I am delighted to join Aston Villa,” he told the club’s official website.
“It’s a club I have admired from afar for many years – there are fantastic facilities at Bodymoor Heath, Villa Park is one of the finest stadiums in the country and there’s a good group of players here, with an experienced and successful manager in Steve Bruce.
“I can’t wait to get started now and look to help the squad achieve something special this season.”