All Blacks centurion Muliaina, 33, had only recently returned to Chiefs after a three-year spell in Japan, but after undergoing elbow surgery will return to action in time for the start of the RaboDirect Pro12 season.
The Samoa-born utility back, who can play fullback, wing or centre, became the second Kiwi to reach 100 caps after Richie McCaw when he played against Argentina in the quarter-finals of their victorious 2011 World Cup campaign.
A broken shoulder suffered in that match ended his international career, but he is still going strong at club level and played six times for Chiefs until his elbow problem.
Muliaina has signed a one-year contract as a player-coach and is the first All Black to play for the Irish side.
"I don’t think I need to point out how huge it is to have Mils Muliaina as our first All Black coming to represent Connacht," Connacht head coach Pat Lam said.
"The second ever All Black and the first ever back to reach 100 Test matches is some achievement but what’s incredible about Mils is the passion and professionalism he brings whenever he plays and I know he will bring that in the Connacht jersey.
"At the age of 33, he still has that hunger to play competitive rugby and before his surgery last month, he showed his quality and ability to keep playing at the top level in Super Rugby.
"It’s exciting to announce that we’ll have him on our team next season."