The 23-year-old utility back, currently playing for English Premiership side London Irish, has signed for one year, a spokesman for the French club said on Thursday.
"President Mourad Boudjellal this morning said O'Connor will play for Toulon next season. And maybe more," he said.
London Irish last week announced that O'Connor would leave at the end of the season after completing his six-month contract at the club.
It was said at the time that O'Connor was willing to play in the southern hemisphere Super Rugby competition next year, hoping to rejoin Australia for the 2015 World Cup.
The talented O'Connor, who has won 44 caps and is capable of playing any backline position, was released from his Wallabies contract in September following a series of off-field incidents.