Schar made 25 appearances for Deportivo in La Liga last season, having moved to Spain from Hoffenheim a year ago.
"I hope to start training with the team soon and I'm looking forward to everything that’s coming," he said in a statement. "At the moment, I just want to get started."
Schar featured in three of Switzerland's four World Cup matches in Russia, helping his team progress from the group stage, before missing their last-16 defeat by Sweden through suspension.
The ball-playing centre-back becomes the Newcastle's fourth recruit in the close season window as manager Rafa Benitez continues to operate on a tight budget.
Newcastle, who finished 10th in the league last season, begin their new campaign against Tottenham Hotspur on Aug. 11.
(Reporting by Hardik Vyas in Bengaluru, editing by Pritha Sarkar)
