Cahill was a free agent after leaving Crystal Palace earlier this month.
The 35-year-old spent two seasons with the Eagles, making 47 appearances across all competitions at Selhurst Park after joining from Chelsea in the summer of 2019.
In seven-and-a-half seasons with Chelsea, Cahill won two Premier League titles, two FA Cups, two Europa Leagues, one UEFA Champions League and one League Cup.
He also won 61 caps for England and played at two FIFA World Cups.
"I am in this stage of my career I needed something that is going to drive me to perform," Cahill told Bournemouth's website.
"I feel this is the best place for me to be. I wanted a goal and something to challenge me.
"I have been fortunate to play in the Premier League, and it is 17 years since I played in the Championship, but I saw an opportunity to be involved in this journey.
"I have always got on well with the manager, I played with him and have a good relationship, and he stressed to me what he is trying to achieve here."
Bournemouth are unbeaten in three championship games so far this season, winning two and drawing one as they aim to gain promotion to the Premier League.
