The former Brazil international was presented at a media conference on Saturday, having spoken of his excitement earlier in the week at the prospect of joining Fener as a free agent.
Club president Aziz Yildirim revealed that Fenerbahce had registered their interest in the playmaker five years ago, and was thrilled to confirm the signing.
"We were interested in Diego in previous years," he said. "In 2009 his parents met here with me.
"On that day, because of the high cost in terms of the transfer, it did not happen. Five years later, we are here today."
Diego, who spent the second half of last season on loan at Atletico Madrid from Wolfsburg, added: "Fenerbahce and I had our conversation before, but the transfer took place this season.
"I'm finally here. I'm also happy for this great community and proud of it."
