"We are convinced his arrival will enrich the tactical nous of the team, unearth the potential of our young talents and guide our club to scale new heights."
Villas-Boas, who is replacing former England manager Sven-Goran Eriksson, is set to become one of the world's highest-paid managers with media reports suggesting the Portuguese will earn a salary of around $13.7 million (11 million pound) per year.
The 39-year-old will be taking up his first job since leaving Russian side Zenit St Petersburg earlier this year.
Shanghai SIPG finished third in the recently completed Chinese Super League season, 12 points behind champions Guangzhou Evergrande, and will compete in an Asian Champions League playoff round for a spot in the 2017 tournament.
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(Reporting by Shravanth Vijayakumar in Bengaluru; Editing by John O'Brien)
