The 33-year-old was released by Premier League West Ham United last month and has signed a one-and-a-half-year contract with the Greens, who are fourth in the league, 22 points behind leaders Olympiakos Piraeus.
Panathinaikos, coached by Giannis Anastasiou, have a new- look team made up of mainly youngsters and loan players due to financial constraints.
Petric, who has also played for Fulham and Hamburg SV, said he could act as a leader and role model to try to improve the team's fortunes.
"I am very happy I've signed for Panathinaikos. Everybody knows what a great club it is," he told reporters.
"I feel that in every team I played in I have been the leader regardless of the age of the players around me. There are some very good young players at the club and I think I can help them."
Petric, who has netted 13 goals in 45 appearances for his country, is reunited in Athens with former Hamburg team mate Marcus Berg as well as Croatia colleagues Danijel Pranjic and Gordon Schildenfeld.
"I am happy I will play again with Marcus. We had a good partnership at Hamburg and I hope we can do the same here," added Petric.