The Cameroon international, 33, joins on a free transfer and links up with former Chelsea team-mate Romelu Lukaku, who signed for £28m this summer.
Everton boss Roberto Martinez said of Eto’o: “I met him and we had a very good chat. I was impressed about the hunger he still has.
“We are very excited and I think Everton is the perfect home for him.”
Eto’o’s contract with Chelsea expired at the start of July and he was not offered fresh terms by Blues boss Jose Mourinho.
He left the Stamford Bridge club calling Mourinho a “fool” and “puppet”.
The four-time African Footballer of the Year scored 12 goals in his 35 appearances after signing a one-year deal from Russian outfit Anzhi Makhachkala last August.
Eto’o started his career at Real Madrid but made his name at their arch-rivals Barcelona.
During his time at the Nou Camp, he won the Champions League twice – in 2006 and 2009 – scoring in both finals, as well as winning the Spanish league three times.
Eto’o moved to Inter Milan in 2009 as part of Zlatan Ibrahimovic’s switch to Barcelona and went on to win the Champions League again in his first season under Mourinho at the San Siro.