Details of the transfer were not disclosed.
Pozuelo made 175 appearances in five seasons with Genk, scoring 25 goals with 60 assists across all competitions.
"Alejandro is an excellent player that has the ability to both create and score goals,” Toronto FC general manager Ali Curtis said in a statement.
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"He is the best player on the best team in Belgium’s top division."
Toronto FC had big holes to fill in their squad after the departure of Italian striker Sebastian Giovinco, the league's former most valuable player, to Saudi Arabia's Al-Hilaland and Spanish midfielder Victor Vazquez to Qatari side Al-Arabi.
(Reporting by Steve Keating in Toronto, Editing by Ed Osmond)
