The 40-year-old was released by west London rivals Fulham earlier in the summer.
Jose Mourinho had been tracking Norwich's England goalkeeper John Ruddy but, after reportedly having two offers rejected by the Canaries, turned their attention to Schwarzer.
Schwarzer first came to England in 1996 to join Bradford City before moving to Middlesbrough in February 1997, going on to play more than 400 times in 11 years for the Teessiders, lifting the League Cup in 2003 and appearing in the 2006 UEFA Cup final against Sevilla.
In 2008, he moved to Fulham, spending five years at Craven Cottage, where he made 220 appearances.
The Australia No 1 made his international debut in 1994, and has since represented Australia 108 times, including at the 2006 and 2010 World Cups.
He helped the Socceroos qualify for the 2014 World Cup in Brazil last month and told Sky Sports News: "Once I found out Chelsea were interested in me, it didn't take very long to make up my mind.
"I was looking to find a club that was right for me. Having spoken to the manager, he made it very easy to decide that Chelsea was the right club. The size of the club, the ambition of the club and the opportunities at the club ticked all the right boxes. This is the opportunity to join one of the best clubs in the country, if not the world."
Schwarzer has vast experience as a first-choice goalkeeper but is set to play the back-up role to Petr Cech at Stamford Bridge.
That's something the veteran is prepared for but he believes he is still capable of making an impact at his new club.
"I know that Petr is No.1," he added. "That goes without saying. He's a fantastic goalkeeper. But what's important is that I can come to a club like Chelsea and push myself as much as possible. If I can push Petr Cech to improve as a goalkeeper and help myself improve as a goalkeeper, I'm sure we can learn a lot from each other and I'd be more than happy with that. There are a lot of games throughout the season so if I can do as well as I believe I am capable of doing then there will be opportunities along the way."
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