The Switzerland international was the Bundesliga outfit's top scorer last season with 12 goals in 32 appearances, prompting Freiburg to take up an option to purchase the player.
Mehmedi, 23, leaves Dynamo two and a half years after arriving from Zurich on a five-year contract.
He moves for an undisclosed fee and Freiburg sporting director Klemens Hartenbach believes there is more to come from the forward.
"The firm commitment of Admir is an important cornerstone for the squad planning for the coming season," Hartenbach told Freiburg's official website.
"We believe that his development is not yet complete, (and) together we want to continue down this road."
Mehmedi's goals helped Freiburg finish 14th in the league last season and he hopes to repay the faith shown in him by the club.
"I am very happy to continue to play in Freiburg," he said. "The club has given me a lot of confidence and I can repay this trust.
"It is good that the cooperation between me and the club will continue."
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