"I know that the club is ambitious and continues to make good progress each year, under the guidance of the chairman, Mohamed Al Fayed. I am looking forward to working with Martin Jol and the rest of the squad when I report to training next week."
The Norway international is recently-appointed manager Martin Jol's second signing of the summer, following the arrival of Hungarian goalkeeper Csaba Somogyi earlier this week.
"John Arne Riise is an experienced international left-back, who will bring a number of qualities to our squad and provide more options for me," said Jol.
"He is used to performing at the very highest level for both club and country and is an accomplished player defensively, who can also contribute to our attacking play.
"I am extremely happy that we've been able to add him to our squad, and believe that he will prove a valuable addition as we progress."