The France international has returned to Ligue 1 from Malaga as Claudio Ranieri seeks reinforcements to enable the newly-promoted side to challenge for honours next season
Claudio Ranieri's men secured promotion from Ligue 2 last season and have wasted no time in investing club president Dmitry Rybolovlev's money to bolster the club with top signings this summer.
The France international, who has signed a two-year contract with an option to extend the deal by a season joins the likes of Radamel Falcao, James Rodriguez and Joao Moutinho as Monaco prepare to challenge reigning champions Paris Saint-Germain for the Ligue 1 crown.
"Jeremy Toulalan, an international midfielder, has signed a two-year contract with an option for an additional year," a statement declared on the club's official website.
"The player will be introduced to the media on July 8 during the press conference for the new players."
Sporting director Vadim Vasilyev added: "We are happy with the signing of Jeremy. His skills, European and international experience will be an important asset for our team this season."
The 29-year-old's move to Stade Louis II marks his return to Ligue 1 having left Olympique Lyonnais two years ago.
Toulalan, who had been linked with Atletico Madrid, moved to Malaga in 2011 for a fee of around £8.6 million (€10m) and established himself in Manuel Pellegrini's side, but the club's need to balance their books has led to his sale.