Having been a product of the New Zealand age grade system, Donald came through the Schools and Under 21 teams, and became a veteran member of the Junior All Blacks before going on to make his debut for New Zealand against England in June 2008.
Director of Rugby, Sir Ian McGeechan, said: "We are very much looking forward to Stephen joining us here at Bath. He is a very effective, skilful player, with a lot of experience which will prove highly beneficial to the younger members of our squad and Academy. Players he has played alongside all speak very highly of his ability and in particular his character, and we expect him to fit in very well here at Bath, having a hugely positive influence on the squad on and off the pitch."
Donald will be a valuable addition to Bath's Heineken Cup challenge which sees them in a demanding pool with reigning champions Leinster, French newcomers Montpellier and Glasgow Warriors.