Caballero arrives Chelsea having been out of contract at Manchester City.
The 35-year-old has a wealth of experience at the highest level. He spent the past three seasons at City, having started his career at Boca Juniors in his native Argentina before playing for Spanish clubs Elche and Malaga.
Caballero said: ‘I am very happy to join Chelsea, the champions of England. I am looking forward to meeting the guys and helping the club achieve more success in the coming season.’
Michael Emenalo added: ‘We are very happy to have Willy on board. He knows the Premier League and is tried and tested at the top of the game.
‘We have three experienced goalkeepers and we look forward to welcoming him to the club when the squad returns to pre-season training.’
Caballero moved to the Premier League in the summer of 2014, linking up once again with Manuel Pellegrini, whom he had played under at Malaga.
Source: Man City FC official website