The Australia international returns to his homeland after an 11-year spell in Europe which took in stints at Feyenoord and Blackburn.
Emerton told the www.sydneyfc.com: "This is an exciting opportunity for me."
He added: "I'm a Sydney boy and I'm looking forward to representing the people of Sydney every week and playing in front of friends, family and Sydney football fans.
"Football has been very good to me and I have always said I'd like to come back and play in the A-League while I still have something to offer and thanks to Sydney FC and Blackburn Rovers that opportunity has come about a bit earlier than I had thought."
Emerton will still be eligible to play for Blackburn in their Barclays Premier League clash with Everton this weekend before flying Down Under for the Socceroos' opening 2012 World Cup qualifiers.
He will then join-up with his new team-mates to prepare for the A-League fixture against Melbourne Victory on October 8.
Sydney FC vice-chairman Scott Barlow said "The Sydney FC Board has for some time viewed the signing of Brett Emerton as a major priority. We have been fortunate that this has come to fruition a year earlier than we had anticipated after Brett requested, and was granted, a release from the last year of his contract with Blackburn.
"Brett is an incredible role model for all young footballers in Australia and his return to his home town of Sydney while he is still at the peak of his powers is a major coup for Sydney FC and the Hyundai A-League.
"We are committed to delivering the highest quality football experience we can to our fans and today's announcement is an important step towards this goal."
Source: PA
Source: PA