Menez arrives in Italy on a free transfer after three years with les Parisiens, where he scored 19 goals in 110 games following an €8 million move from Roma in July 2011.
The Frenchman flew to Milan to undergo a medical on Friday and the Rossoneri have since released a short statement confirming the transfer.
"AC Milan announces that Jeremy Menez has signed a contract that will tie him to the club until June 30, 2017," the club wrote on their official website.
Menez had previously expressed his excitement at working with new Milan boss Filippo Inzaghi and also promised Rossoneri supporters that he would "give everything on the pitch" to return the club to the top three in Serie A.
Milan finished a disappointing eighth in the league last term, finishing 45 points behind champions Juventus.