"After careful consideration of all arguments and lots of discussions, I have decided to change to Russia and Dynamo Moscow," the striker said in an open letter to fans on Sunday, a day after Schalke finished second behind Bayern Munich in the Bundesliga.
Kuranyi scored a personal best 18 goals this season and was tipped to rejoin the national team before Germany coach Joachim Low kept him out of his World Cup selection.
But with Schalke in need of cash, he was considered as a major club asset who needed to be sold.
"I have always believed that the total package (for a club) is what is important and I believe that is the case at Dynamo," he said.
Dynamo, Russia's oldest football club founded in 1923, want to follow CSKA Moscow and Zenit St Petersburg - who both won the UEFA Cup in the past five years - by securing a European title.
Kuranyi said he wanted to help Dynamo fulfil their European ambitions.
"Now it is Dynamo who want to have similar performances and build something big," the 28-year-old said.
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