The 28-year-old, who made the announcement on the Waikato Chiefs' Facebook page on Wednesday, will still be eligible for All Blacks selection when the British and Irish Lions tour New Zealand later this year.
"It is with great sadness but great excitement that this will be my last year playing rugby here in New Zealand," Cruden said in a video posted on the Chiefs' page.
"I have signed a three-year deal with Montpellier in France, which is a beautiful part of the world, a fantastic rugby club and a real opportunity (for me) to go out there and experience something different."
Cruden played 47 tests for the All Blacks and for a long time was seen as the heir apparent to Dan Carter in the number 10 jersey, though injuries cut short his opportunities to truly cement the role.
He was chosen ahead of Beauden Barrett for last June's Wales series, the first since Carter left New Zealand to play in France, but a neck injury in the second test allowed the Wellington Hurricanes flyhalf to seize his opportunity.
Barrett quickly established himself as the starting flyhalf, after mostly being used as an impact player, and was named World Rugby's Player of the Year in 2016.
Cruden was one of three high-profile All Blacks players who had been targeted by European clubs over the southern hemisphere summer, with the playing futures of fullbacks Israel Dagg and Ben Smith still undecided.
Tighthead prop Charlie Faumuina has previously confirmed he will be leaving after the Lions tour.
Scotland's New Zealand-born coach Vern Cotter is taking over at Montpellier following this year's Six Nations.
(Reporting by Greg Stutchbury; Editing by Peter Rutherford)
