Schwarzer has signed a one-year contract at Stamford Bridge, and is expected to act as back-up to first-choice goalkeeper Petr Cech.
Jose Mourinho had been the in the market for a goalkeeper following the departures of Ross Turnbull and Hilario, and the announcement Thibaut Courtois will spend another season on loan with Atletico Madrid.
Reports had linked the Blues with a £7 million move for Norwich No.1 John Ruddy, but they have instead chosen Schwarzer, 40, who was released by Fulham following the arrival of Maarten Stekelenburg from Roma.
"It's a phenomenal club," he told the club's official website.
"It's one of the biggest and best clubs in the world, and it's an honour to sign for Chelsea. I didn't take much convincing to come here."
With the 2014 FIFA World Cup less than 12 months away, the move is something of a gamble for Socceroo Schwarzer, who had previously said he wanted to play first-team Premier League football next season.
Goal.com Australia understands a switch to Hull City - where he would have been likely to be first-choice - fell through when the promoted club could not meet Schwarzer's wage demands.
The move realises a long-held dream of a switch to one of the Premier League's heavyweight clubs, after Schwarzer was denied a transfer to Arsenal by then-Fulham manager Mark Hughes in 2010.