The Portuguese champions, who recently sold first-choice goalkeeper Jan Oblak to Atletico Madrid, confirmed on their website that the 34-year-old had signed a two-year contract.
Julio Cesar started last season at Queen's Park Rangers in the English championship (second tier), where he did not play a single league game, before joining MLS club Toronto FC on loan in February.
Despite his lack of top-level football, he was Brazil's first-choice goalkeeper at the World Cup which they hosted.
Although he was the hero in the penalty shootout win over Chile in the second round, Julio Cesar was on the wrong end of seven goals as Brazil were humiliated 7-1 by Germany in the semi-final.
Raised at Brazilian club Flamengo, Julio Cesar spent seven years at Inter Milan, winning five Serie A and one Champions League title, and was regarded as one of Serie A's top goalkeepers until he was unceremoniously offloaded in 2012.
At international level, he played in the Brazil team which won the 2004 Copa America with a penalty shootout win over Argentina in the final, but then lost his place to Dida for the 2006 World Cup.
He won back his place under Dunga and was also Brazil's first-choice goalkeeper in the 2010 World Cup, where they went out in the quarter-finals.
(Writing by Brian Homewood; editing by Toby Davis)
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