O'Connor, who has 44 Australian caps and 223 points in Test rugby to his name, is expected to make his Irish debut against Northampton at the weekend and is likely to be a key figure when they host the Parisian giants at the Madejski Stadium in five-and-a-half weeks' time.
"James is a world-class player and a terrific kid and it is fantastic to have him at London Irish," said Exiles boss Brian Smith, who believes the 23-year-old is the "most significant signing in the club's history".
"He will bring a huge amount of experience to our group and will fit in well to our style of play.
"He is fit and ready to play so the coaching group will get him up to date on everything and hopefully he'll be ready to go this weekend.
"As an Australian, I see him as a player who can genuinely go on to become the most capped Wallaby of all time and we hope to play a part in that.
"He is an asset for London Irish and the game over here. His signing is the injection of class we need."
O'Connor, who can play fly-half, centre, wing or full back, started all three summer Tests against the British & Irish Lions and has long been regarded as one of Australia's most-talented players.
But off-field issues have slowed his progress in recent times, with his latest alleged indiscretion resulting in him being ruled out of international action for the rest of the year and having his Australian Rugby Union contract terminated.
O'Connor had been in talks with former side the Western Force with a view to remaining in Australia but he has instead opted to head north, although he hasn't ruled out a return home prior to the 2015 Rugby World Cup.
"Having decided that I needed a change from both a personal and playing point of view, I spoke to clubs in Japan and France, and concluded that the best way forward for my development was to move to England," said O'Connor.
"Given that I've left my support network back in Australia, London Irish offered me an environment that I felt comfortable with. The club is renowned as a welcoming, family club throughout the world, it has a highly regarded Australian director of rugby in Brian Smith and plays a style of rugby that appeals to me.
"In England and Wales they play a very high-pressured, territory based game. I thoroughly believe I can improve elements of my game."