The widely anticipated announcement comes after it was confirmed in May that the Briton, regarded by many as the greatest designer in the sport's history, would be leaving Red Bull.
Aston Martin F1 team owner Lawrence Stroll said Newey, who will start his new job in March 2025, "arguably is the greatest in the world at what he does".
"There's nobody who's come close to winning as many world championships," said the Canadian billionaire.
"He's a gentleman, he's a winner, he's a competitor and he has the passion and desire to win, as do I."
Newey, who will also become an Aston Martin shareholder, said he was flattered to have had "a lot of approaches from various teams" but said he was won over by Stroll's passion.
"Lawrence is determined to create a world-beating team," he said. "He is the only majority team owner who is actively engaged in the sport."
He added: "They (the team) have all the key pieces of infrastructure needed to make Aston Martin a world championship-winning team and I am very much looking forward to helping reach that goal."
Newey will work with the team's drivers, Stroll's 25-year-old son, Lance, and two-time world champion Fernando Alonso, 43.
Championship dream
Lawrence Stroll said Newey's appointment was the "biggest story since the Aston Martin name returned to the sport and another demonstration of our ambition to build a Formula One team capable of fighting for world championships".
It comes after the recent appointments of former Ferrari technical director Enrico Cardile as chief technical officer from 2025 and former Mercedes engine chief Andy Cowell as group chief executive, who joins next month.
Aston Martin are currently fifth in the constructors championship heading into the final stretch of the 2024 season.
Red Bull announced in early May that Newey would be leaving the world champions in the "first quarter of 2025" after nearly two decades and would step back from design duties to focus on final development and delivery of the RB17 hypercar.
Newey, who will reportedly earn up to £30 million ($39 million) a year at Aston Martin, has built a reputation as the greatest F1 designer in history after winning 12 drivers' championships and 13 constructors' titles in a career that spans the Williams, McLaren and Red Bull teams.
He helped transform Red Bull from an energy drinks company into an F1 giant, with Sebastian Vettel landing four consecutive titles between 2010 and 2013.
Mercedes then emerged as the dominant force but Red Bull fought back to reclaim their spot at motor racing's summit, with Max Verstappen taking the 2021 title before storming to the next two championships.
The Dutch driver had looked on course to romp to a fourth consecutive title this season but his lead has been reduced to 62 points with eight races remaining.
Red Bull team boss Christian Horner recently denied that Newey's departure has contributed to his team's recent slump, which leaves Verstappen heading to this weekend's Azerbaijan Grand Prix in Baku without a win in his past six races.
It was reported earlier this year that Newey became unsettled after Horner was accused of sexual harassment and inappropriate behaviour by a female employee.
The team principal was cleared in February of wrongdoing by an internal investigation carried out by Red Bull's parent company before the employee was then suspended. An appeal was dismissed last month.
