The Chile international had struggled to make an impact at Palermo, netting just two goals in 14 competitive appearances since the start of the season.
"I am proud to be part of a great team with a great past," Pinilla told Cagliari's website.
"I never had the chance to come to Sardinia, even when I was playing for other teams in Serie A, but I know it is a beautiful place with beautiful beaches.
"I know this is one of the best clubs in Italy for their professionalism and organisation. This is one of the best clubs in Serie A and we should fear no one."
Meanwhile, Cagliari have confirmed that they have secured the option to buy Pinilla at the end of the season, should he impress.
Pinilla, who signed for Inter in 2003, earned a move to Palermo in 2010 after an impressive season with Serie B side Grosseto.
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