The 29-year-old spent last season on loan at Inter, making 28 Serie A appearances, and has reportedly been monitored by the likes of Cagliari, Sunderland and Fulham in recent weeks.
Gargano, capped 47 times for Uruguay, joined Napoli in 2007 from Danubio and helped the club to win the 2011-12 Coppa Italia during 199 appearances, but admits he is thrilled to be moving to Stadio Ennio Tardini.
"It is very emotional to come here, meet the team-mates, the club," he told Parma Channel.
"I am proud to be at Parma. It is the club that has shown that they want me the most, they have a great history which I know and my family likes the city a lot. I couldn't have made a better choice."
Gargano will join the club for the 2013-14 campaign, with Parma retaining the option to make the move permanent at the end of the season.