Sydney FC officials will fly to Italy over the weekend to conclude the signing of the former Italian striker who left Juventus last season after 19 seasons.
"This is huge for Sydney FC, huge for the A-League and huge for Australian football," Sydney chairman Scott Barlow said in a statement.
"We feel honoured that Alessandro has decided to play for Sydney FC and we share his excitement that a move to Sydney FC will create a lasting legacy for football in this country."
Del Piero, who won the World Cup in 2006 and six Serie A titles, one Champions League and an Intercontinental Cup, is the biggest name to move to the A-League.
Del Piero had been linked with a move to Sion in Switzerland, Celtic in Scotland and a host of Asian sides.
The new A-League season starts in October with 10 teams.
Financial issues have hit the league in the past with some team owners complaining about the Football Federation of Australia (FFA) and their management of the league. Gold Coast United had their licence terminated in February while the Newcastle Jets walked out before performing a U-turn in May.