Bodmer, who spent the second half of last season on loan at Saint-Etienne, moves to the Allianz Riviera after falling down the pecking order at the PSG due to the number of arrivals at the French capital club.
The 30-year-old joined PSG from Lyon in 2010 following tensions with then manager Claude Puel.
However, the acquisitions of central midfielders Thiago Motta, Blaise Matuidi and Marco Verratti pushed Bodmer out of the first team, however he did enjoy success last season, winning the Coupe de la Ligue with Saint-Etienne in April.
Bodmer will now reunite with Puel, who guided Nice to a fourth-place finish last season after taking over from Rene Marsiglia.
Nice were eliminated in the play-off round of the Europa League by Cypriot side Apollon, but Puel will hope that Bodmer's experience will help the Cote d'Azur club challenge the upper echelons of Ligue 1 this campaign.
A statement on the PSG website read: "Paris Saint-Germain and Mathieu Bodmer decided to end their collaboration on Monday. The player is now free to sign with OGC Nice.
"The club would like to thank Mathieu Bodmer for his professionalism throughout his time in the capital and wish him good luck for the rest of his sporting career."
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