Harbhajan, 24, nicknamed the 'Turbanator', has taken 172 wickets at an average of 27.92 in 39 Tests and is widely regarded as one of the best slow bowlers currently in world cricket.
He arrives at The Oval, Surrey's home ground in south-east London, with the club's previous Test off-spinner, Pakistan's Saqlain Mushtaq struggling with knee injuries.
Surrey cricket manager Steve Rixon said: "This is great news for the Club. With Saqlain struggling to recover from two serious knee injuries I felt we needed to strengthen our spin attack. "
"Harbhajan is one of the world's best spin bowlers and he'll relish the sort of pitches produced here at The Oval," the former Australia wicket-keeper added.
"I'm looking forward to pre-season training in March and am happy with the balance and size of our squad next year. I am confident we can bring more silverware to the club next summer."
Harbhajan will join Pakistan pace bowling all-rounder Azhar Mahmood as Surrey's overseas players for next year.