The 24-year-old spent time on trial with TFC earlier this year. He heads to the Canadian club after spending his entire career in his native Spain.
“Alvaro trained with the team for several weeks last month, and played in a reserve match with us against Montreal." TFC president and general manager Kevin Payne said in a club press release. "He’s very technical and quick, and is good at taking on defenders.
“He offers something different than we typically see in MLS and we think he’ll help our team become more dangerous.”
A 25-year-old from Seville, Rey joins TFC from Spanish second division club Xerez, where he spent the 2012-13 campaign. He made 29 appearances in all competitions for the Azulinos, scoring three times. Prior to his time at the Andaulsian outfit, he spent two seasons with Gimnastic de Tarragona.
Rey also had brief spells early in his career with Real Betis' reserve squads, as well as a stint at Gimnastic's affiliate club Pobla de Mamufet.
The move to Toronto represents the first time Rey will play professionally outside of the Spanish pyramid.