The 32-year-old attacking midfielder joins the MLS's Eastern Conference-leading Red Bulls as their third top paid 'designated player' alongside former Arsenal and France striker Thierry Henry and Mexican Rafa Marquez.
"As we have seen over the past few years, MLS has developed into a very competitive league with many talented players," Cahill said in a statement.
"I am impressed with what the Red Bulls are trying to accomplish in MLS and within American soccer and I am looking forward to this new challenge."
His wage, which as a 'designated player' is mostly from outside of the salary cap limit, will almost certainly make him one of the top earners in the league.
"He is the technical, physical presence we have been looking to add in our team and he brings a wealth of experience to our club," said Red Bulls General Manager Erik Soler.
"Tim is a proven leader both on and off the field and we believe that he can help us immediately in our quest to win the MLS Cup this season."
