The Blues have secured a new number two shot-stopper ahead of the 2017/18 Premier League season after he left Pep Guardiola’s side.
Caballero, who was out of contract after leaving Manchester City, has arrived as the Blues’ new number two shot-stopper after Asmir Begovic moved to Bournemouth.
The Argentine will deputise for Thibaut Courtois who is in negotiations with Chelsea to renew his contract at the club.
“I am looking forward to meeting the guys and helping the club achieve more success in the coming season.”
Technical director Michael Emenalo added: “We are very happy to have Willy on board. He knows the Premier League and is tried and tested at the top of the game.
“We have three experienced goalkeepers and we look forward to welcoming him to the club when the squad returns to pre-season training.”
Newcastle United also attempted to sign Caballero, 35, but he instead opted for Chelsea to replace Begovic, who was frustrated with a lack of first-team opportunities at Stamford Bridge and even tried to push for an exit in January.
Chelsea held onto Begovic in the winter market but they agreed to sell him in the summer, accepting Bournemouth’s £10m offer in May.
Caballero’s departure from City was made public a while ago and Pep Guardiola has since brought in Ederson from Benfica for £34.7m to strengthen his options in goal.