"I'm very happy to be here," the 36-year-old Nesta said in a statement released by the club on Thursday. "Despite some offers to continue my career in Europe, I was looking for a new challenge and wanted to play in MLS."
Nesta left AC Milan at the end of last season following 10 trophy-laden seasons with the Rossoneri.
He won two Champions League and two Serie A titles with Milan following his move from Lazio in 2002 and was widely regarded as one of his country's finest defenders.
He played 78-times for Italy and lifted the World Cup in 2006 after a penalty shootout win over France.
Nesta will link up with his former Lazio team mate Marco Di Vaio at struggling Montreal, who are currently eighth in the 10-team Eastern Conference with five wins from 19 matches.
"Upon visiting my friend Marco to see him play his first game with Montreal, I met great people in this club. I really liked what I saw and I was convinced Montreal was where I wanted to be," Nesta said.
Impact coach Jesse Marsch was desperate to get the defender into action and help drag the team away from the lower reaches of the table.
"It's an incredible opportunity for our club to add a defender of his talent. We are very anxious to get him into our lineup because he will make us better on every level," Marsch said.
