The 32-year-old former Liverpool forward had been without a club since leaving Turkish side Galatasaray at the end of last season and had been negotiating a move for more than two months.
"Harry is an Australian sporting icon and will bring not only incredible talent to Melbourne Victory but will attract more fans to football and boost greater interest and participation in the sport in Australia," the club's chairman Anthony Di Pietro said in a statement.
"Our discussions with Harry have been progressing for some time and we are delighted to have completed what is the most significant signing in Australian football and... A-League history."
The move for Kewell, who has scored 16 goals in 54 appearances for his country and played in two World Cups, ends a European-based career which, although successful, could have been more fruitful if it wasn't for continued injury problems.
Although his signing is a major coup for the struggling domestic league, which has seen clubs struggle with finances and one close, Kewell and his agent have been pilloried in the Australian media for lavish demands, which included a cut of ticket sales.
"I am proud to be Australian and want to give something back to the game there," Kewell told the Melbourne Victory website.
"It has always been my ambition to play in my home country and I am very pleased to have that opportunity by playing for Melbourne Victory."
Twice A-League champions Melbourne Victory, who kick-off their season on October 8 against Sydney FC, has signed a three-year deal with Kewell, local media said.
Football Federation Australia (FFA) also hailed Kewell's homecoming.
"This is a red-letter day for the... A-League and Australian football," FFA Chief Executive Ben Buckley said in a statement.
"The signing of Harry Kewell tells the story of ambition, credibility and growth for the game in Australia.
"Harry is rightly acclaimed as Australia's most gifted footballer with a celebrated record of achievement. His homecoming will be hugely popular."
A tricky winger, he made his name at Leeds United who he joined after a trial as a 15-year-old, before moving to Liverpool where he won the Champions League in 2005 and the FA Cup in 2006.
In recent years, his slowing pace has led him to play in a more advanced role but he has struggled to score regularly.
He was guilty of a costly miss when clear through on goal late on in the Asian Cup final in January, which Japan won 1-0 after extra-time.
But despite the problems, the Sydney-born forward remained in demand with a number of A-League side expressing an interest in signing him.
The end of the transfer saga is also likely to see Kewell regain his place in the Socceroos squad ahead of their World Cup qualifying campaign which starts next month.
Kewell was left out of the Socceroos'
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