Jallet moves to the Stade de Gerland after five years with defending Ligue 1 champions PSG in which he won every trophy in French domestic football.
The 30-year-old was limited to just 18 appearances last season, though, with Gregory van der Wiel becoming Laurent Blanc's first choice on the right-hand side of the defence.
And, with Toulouse star Serge Aurier rumoured to be close to joining PSG, Jallet has opted to make the switch.
Jallet follows centre-back Lindsay Rose to the seven-time French champions, becoming new coach Hubert Fournier's second signing of the transfer window.
"From the moment Lyon told me of their told me of their interest, it was a priority for me," Jallet told Lyon's official website.
"I am very pleased to be here today. This is a new challenge for me, I have experienced a lot of things in my career.
"I want to take some new steps. I spent wonderful years in Paris but I need to go elsewhere to find some game time and fun.
"I am very happy to join this quality group to try and make my contribution to the defence and make a very nice season."
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