While the 36-year-old was favoured to join Birmingham City, Villa have reportedly trumped their rivals with the multi-million dollar deal, which includes bonuses if he helps them gain promotion back to the Premier League, according to the Mirror.
The move will see the Chelsea great play in the Championship for the first time in almost two decades after he officially becomes a free agent on Saturday when his Chelsea contract expires.
Capped 492 times for the Blues, Terry played six games for Championship outfit Nottingham Forest in 2000 - his only spell away from Stamford Bridge during his illustrious career.
With Terry reluctant to play against Chelsea next season, despite offers from a range of Premier League outfits, the former England captain is said to be interested in the challenge of helping Villa return to England's top flight.
He will play alongside Australia's injured captain Jedinak, who made 33 league appearances for Villa last campaign.
Villa are due to unveil their new kit on Saturday and Terry's signing would be a massive boost to the club, who finished 13th in the Championship last year after relegation from the Premier League 12 months earlier.
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