The England striker will cost the Canadian side £6 million, an MLS record, and will be joined by United States midfielder Michael Bradley after he was recruited from Roma
The Tottenham striker has agreed to join the Canadian side ahead of the start of the MLS season in March for a division record £6 million fee.
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"We are thrilled, for our club and for our fans, with the opportunity to bring a global football superstar like Jermain Defoe to Toronto FC," said Tim Leiweke, president and chief executive of the franchise's holding company, Maple Leaf Sports and Entertainment (MLSE).
"We promised our fans in October that building a winning club was our top priority and we scoured the globe to find the right players to fulfil that promise.
"Right from the beginning of this process, Jermain Defoe was the top player on our list and we got our man.
"We would like to thank Tottenham as well as MLSE ownership for this very clear demonstration of our commitment to winning. Most importantly, we want to thank Toronto FC fans for their patience and support getting to this day."
Toronto general manager Tim Bezbatchenko added: "Jermain brings the complete package to Toronto FC.
"He is an accomplished scorer and I know that his skill and infectious personality will make him a popular star both in Toronto and around the League."
Michael Bradley will join Defoe at the BMO field after leaving Roma.