McRae, who has just finished a week's training with the Australian Wallabies, is currently part of the Randwick Club side involved in the Australian Premier Division competition.
McRae will join up with his new Kingsholm teammates once his commitments in Australia are completed.
A former Australian Sevens and Barbarians representative, Duncan McRae is a dynamic utility back who returned to Super 12 rugby with the Waratahs in 2001 after a season with Zurich Premiership Club Saracens.
In his first season back, impressive performances saw McRae earn a spot in the Australia A team for the series against France A.
A former Australian Schoolboy international, McRae spent six seasons in rugby league in the 1990s with South Sydney and Canterbury.
McRae said, 'I am obviously wrapped to have the chance to come back to England and the opportunity to be joining such a successful team'.
'Gloucester had an excellent season last year and I hope I can be part of more of the same this season'.
'I have been to Kingsholm and the world-famous support is fantastic, I can't wait to have that behind me when we run out'.
Although signed primarily as a fly half, McRae's versatility, gained through time in both rugby league and union, will serve Gloucester well, particularly during the World Cup period.
'Obviously ten is my favourite position but I'll play anywhere the coach wants as I can cover a number of positions', said McRae.
McRae's experience of Super 12 rugby with the Waratahs, as well as Zurich Premiership and European Cup rugby gained at Saracens, will also be a valuable commodity as Gloucester's Powergen Cup winning squad aims to go one better in all competitions this season.
McRae says he is looking forward to the challenges of the Heineken Cup with Gloucester.
'I have played in the European Cup with Saracens, and I didn't realise just how big it was until I played in front of a full house against Toulouse. It was massive'.
'It rocked my world to be honest, and I want to help Gloucester to be successful in this competition this year'.
Gloucester's Director of Rugby Nigel Melville, who adds McRae's name to summer signings, Steve Brotherstone, Paul Johnstone and Alex Brown, admits he is excited about the prospect of McRae controling Gloucester's back line next season, but is also looking for the experienced fly-half to help the development of some of Gloucester's younger players.
'We know that McRae is a player of real quality, and we are excited about what he can do in a Gloucester shirt', said Melville.
'He has all the skills and can play in a number of positions, which might help us during the World Cup period.
'He knows the Zurich Premiership, and the Super 12 competitions, and has been around for a while, which will help the young players we have in the squad to develop around him', he added.