Spaniard Espargaro clinched three MotoGP race wins during a 15-year career on the motorbike.
The 35-year-old begins his Lidl-Trek contract on January 1 and will join the side as an ambassador for unspecified "prestigious" cycling races.
"I'm thrilled to join the Lidl-Trek family, which is home to some of the world's best cyclists," Espargaro said.
"After a back injury forced me to give up running I turned to cycling for recovery and training.
"Over time, it became more than just preparation — it became my passion.
"Living in Andorra, I made friendships with many pro cyclists, which inspired me to train at a higher level."
His new team-mates include former Giro d'Italia winner Tao Geoghegan Hart, Belgian veteran Tim Declercq and 2019 road race world champion Mads Pedersen.
"Working with Aleix will be incredibly rewarding for us, and especially for our young riders," said Lidl-Trek general manager Luca Guercilena.
"We know he is a strong, passionate cyclist, but he also brings different experiences and perspectives to the Team. He can help our younger athletes understand and handle the pressures that come with top level competition."
The first major race of the 2025 cycling season is the Tour Down Under in Australia from January 21-26.
