The 35-year-old striker has played for a host of Europe's top clubs during his nomadic career, including the likes of Arsenal, Real Madrid, Chelsea and Juventus.
Anelka was sacked by West Brom in March after making a quenelle gesture, which is deemed to have anti-Semitic sentiments, in a Premier League clash with West Ham.
It looked as though he would join Brazilian outfit Atletico Mineiro, but the club announced in April that the deal was off, citing complaints about Anelka's late arrival into the country.
On Monday it was announced Anelka would join Mumbai to link up with former Germany international Manuel Friedrich, while Anelka's compatriots David Trezeguet and Robert Pires have also signed up to play in the ISL for other franchises.
"I'm pleased to join Mumbai City FC & very exciting in joining Indian Super League," Anelka posted on his official Twitter account.
"Talented international players & top Indian talent will make matches thrilling affairs. I look forward to using my ability to do well for my team in the matches we will play.
"Are you ready @mumbaicityfc ? Here I come. Looking forward to it!"
The Mumbai franchise is co-owned by Bollywood actor Ranbir Kapoor, while former Sunderland and Manchester City boss Peter Reid will manage the side.
"We are delighted to announce the signing of Nicolas Anelka and thrilled that a player with a stunning pedigree such as his is part of our team," Kapoor said.
"His abilities and experience are known the world over and I am certain his presence will give us the firepower required up front. We welcome him to the Mumbai City FC squad."
