Balding, 21, who has been on trial with the Exiles and has impressed head coach Lyn Jones, came through the Leicester Tigers Academy, making his first-team debut for the club in 1998.
Jones said: "It's a very good signing for us. Adam brings a wealth of experience in the Premiership and will be a huge addition on the training ground as well as on the pitch. It works well for both parties."
He left Welford Road in 2004 to join Gloucester, where he spent three years and ended an impressive debut season as club captain. After 60 appearances for the Cherry and Whites a three month loan spell to Leeds Carnegie during his final season at Kingsholm was made permanent in 2007.
He remained at Leeds until the end of the 2007/08 season, making 11 appearances, before joining Newcastle Falcons, where he spent the next two seasons.
In 2010 he joined Worcester Warriors and helped the club win promotion back to the Premiership, playing in 22 games in the club's Championship winning season. After an injury disrupted second season at Sixways he re-joined Newcastle and the club's fight against relegation. In total, Balding made 46 appearances for the Falcons.
Balding has represented England at every age-group through to England Saxons and has also played for England at Sevens.
"This will be my 15th season as a professional rugby player and the fire inside to play the game burns just as brightly as when I started out with Leicester," said Balding.
"I took some time away from rugby at the end of last season to recharge the batteries, but I'm delighted to be back and joining up with Lyn Jones and London Welsh. I'm very grateful to get this opportunity and I am now really looking forward to the challenges ahead."