Goodwin, 31 and who also plays for Western Australia, was looking for a longer deal, which Sussex were unwilling to offer with a second overseas player, Pakistani spin wizard Mushtaq Ahmed, also under contract.
However despite being snubbed by Kirsten, Sussex will have a superb opening partnership in Goodwin, who was instrumental in their championship triumph, and their recent signing from Surrey, Ian Ward.
"It was a long, drawn-out affair but we wanted to make sure we got the right person," said coach Peter Moores.
"Murray is the final piece in the jigsaw for 2004.
"We spoke to Gary Kirsten who has a very good reputation and average but Gary decided to pursue other options. We have been in talks with Murray since the end of last season and are very pleased we were able to come to an arrangement with this one-year deal."
Goodwin, who played the last of 19 Tests in 2000 when he left because he objected to the regime of President Robert Mugabe, scored 1496 runs last season climaxing with the highest ever score by a Sussex batsman of 335 not out in the final match of the season.
Darren Gough moves to Essex County