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Drogba decided to leave Chelsea at the end of last season after scoring the winning penalty in the UEFA Champions League final against Bayern Munich.
The 34-year-old was linked with several clubs, and was reported to have attracted interest from the Middle East and Major League Soccer.
However, Chinese club Shanghai Shenhua were always favourites to land the Ivory Coast international, who has agreed a two-and-a-half year contract.
The ex-Marseille forward is looking forward to the new challenge and the move will see him reunited with former Chelsea team-mate Nicolas Anelka.
Zhu Jun, owner of Shanghai Shenhua FC, said: "We have been wanting to sign Didier for a while, and are very happy that it has finally happened.
"He is an incredible player, who has won so many trophies in his career, we feel that his experience and ability will be a very valuable asset to our squad. "Shanghai is one of the most influential cities in the world, and we are very excited to welcome Didier here."