Barkley spent last season in the French Ligue 1 with OGC Nice, where he scored four goals and provided two assists in 24 league games.
Barkley was released after his only season in France and has accepted an offer to resurrect his career with the Hatters.
The 29-year-old boasts over 200 Premier League appearances for his boyhood club Everton, Chelsea and Aston Villa, where he spent the 2020/2021 season on loan.
Barkley is in line to make his debut for Luton when they make their Premier League bow at Brighton and Hove Albion on Saturday.
"Why Luton? Going from the Conference to the Premier League is a great story and for me personally to be back in the Premier League, it's great motivation," he told the club's website.
"I'm still relatively young and over the last couple of years I've not played as much as I'd have liked.
"But I've reserved a lot of energy and looked after myself, so it's great to be here now as I've got a lot to show but I'm ready and feeling motivated."
Manager Rob Edwards added: "Ross brings loads of experience at the top level, has international experience and brings an x-factor.
"He gives us something different, he has that ability to make something out of nothing and we need that in the Premier League. He's got all the tools required to make a difference for us.
"It's really exciting for the football club. We want the fans to be excited and they should be about Ross's arrival."
Barkley has won 33 caps for the England national team.
