Kelly spent five years at Bournemouth where he was initially signed by current Newcastle head coach Eddie Howe.
The 46-year-old admitted he was looking forward to working with the defender again when preparations for next season get underway.
“I’m really pleased to have secured Lloyd’s signature,” Howe said. “He’s a player who’s proven himself at Premier League level and I’m certain he’ll be a great addition as we prepare for the new season.
“Lloyd is a player I’ve admired since the early stages of his career. Alongside his undoubted defensive ability, he brings versatility and leadership qualities that I believe will make him a great fit within our squad and somebody our supporters will quickly take to.
“He has plenty of Premier League experience already under his belt, yet Lloyd’s at an age where he can still develop. He has a lot of potential and I’m really looking forward to working with him again.”
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