The goalkeeper's departure from Real Madrid was announced on Saturday after weeks of rumours that he would leave the club.
Porto revealed in a statement on Sunday that the Spain international has put pen to paper on a deal that ties him to Julen Lopetegui's side until at least 2017.
"Goalkeeper Iker Casillas, 34, signed for Porto for the 2015-16 and 2016-17 seasons, with an option of further season," the Portuguese club said in a statement.
"The Spain international and former Real Madrid man becomes the player of the club with the richest history in the Portuguese league and also becomes the first former world champion teams to represent the Dragoes."
Casillas then gave his reaction to the move on Twitter: "Happy to start this new stage of my career #SomosPorto."
Casillas gave an emotional press conference earlier on Sunday in which he said goodbye to the club with whom he has been playing for since 1990.
Fabiano was Porto's No.1 last season but was signed by Fenerbahce earlier this month, meaning Casillas will be first choice for last season's Champions League quarter-finalists.
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