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.
"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."
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."
Kewell was left out of the Socceroos'
