"Shevchenko has signed a two-year contract," the Ukrainian club said on their website on Saturday.
Kiev added the 32-year-old Ukraine striker would be presented as their player on Sunday.
On Friday, Chelsea manager Carlo Ancelotti said he could not guarantee Shevchenko first-team football.
"I spoke with Shevchenko and he would like to play with continuity here. For me it is difficult to give him this possibility and I think he has taken the right decision (to move)," Ancelotti said.
Shevchenko never justified the club record 30 million pounds fee that Chelsea paid AC Milan for him in 2006. He scored only nine league goals in his first two campaigns and was loaned back to the Italian team last season.
With Ukraine still in with a chance of qualifying for next year's World Cup, the 2004 European Footballer of the Year faced a season on the fringes at Chelsea.
Shevchenko, who left Kiev for Milan in 1999, was also in danger of being left out of the London club's Champions League squad when it is named on Tuesday.
The Ukraine captain is one of the leading scorers in the Champions League and will get a chance to add to his tally of goals with Kiev, who have been drawn in Group F with holders Barcelona, Inter Milan and Rubin Kazan.
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