Pozuelo, who has twice been included in MLS' team of the season, will occupy an International Roster slot and a Designated Player slot.
"We're thrilled to be able to welcome a player of Alejandro's caliber. He has proven himself to be one of the brightest talents in the league and we are confident that will continue here in South Florida," Sporting Director Chris Henderson said in a statement. "We were looking to add a decisive, creative attacking player and we feel he fits the profile."
Pozuelo, 30, enjoyed spells at Real Betis, Swansea City, Rayo Vallecano and Genk before moving to Toronto in 2019. He scored 29 goals in 99 games in all competitions during his three-year spell in Canada, where he helped the side to the 2019 MLS Cup final. The highlight of Pozuelo's time at Toronto came in December 2020 when he won the Landon Donovan MVP award.
"We believe Alejandro will fit right in with our group. He's a player of tremendous quality that we feel can be a real game changer for us," head coach Phil Neville said. "We can't wait to integrate him into the squad and are looking forward to seeing him on the pitch in Inter Miami colors."