The 33-year-old Ireland international moves to Glasgow until at least May 2016, after spending the last two seasons at Munster.
A Churchill Cup winner with Ireland in June 2009, Downey began his career at Leinster before moving to Connacht and then Munster.
Prior to joining Munster for a second spell in 2011, he spent a season at Calvisano in Italy before moving to Northampton Saints.
He quickly became a regular in the Saints backline at inside centre, making 148 appearances and scoring 13 tries during a five-year spell at Franklin's Gardens. In 2009 he won the European Challenge Cup with Northampton.
Downey made 47 appearances for Munster and has featured in all of their Heineken Cup games over the past two seasons, including the quarter-final win over Toulouse at Thomond Park in April.
He recently faced the Warriors at Scotstoun, after being included in Rob Penney's starting line-up for the RaboDirect PRO12 Play-Off in May.
Downey made his senior debut for Ireland when he started against Canada on the tour to North America last summer.
He will join up with his new teammates at a pre-season training camp in France next week.
James Downey said: "I'm really excited about moving to Glasgow and taking on this new challenge.
"This is a great opportunity for me to join an ambitious club and hopefully I can have a successful couple of years in Glasgow.
"The squad gets stronger each year and reaching the RaboDirect PRO12 Final for the first time last season shows the progress the club is making. I know I'll have to work hard to get into the team.
"I'm looking forward to playing at Scotstoun regularly in front of very passionate supporters. The atmosphere at the RaboDirect PRO12 Play-Off was incredible.
"I can't wait to meet my new teammates and start pre-season training."
Glasgow Warriors head coach Gregor Townsend said: "James is a quality player who will be an excellent addition to our squad.
"He is a tough defender and brings real physicality when carrying the ball.
"He has a lot of experience having played for Northampton and Munster, and has been involved in some epic European games.
"This experience, as well as his rugby ability will help us to make further progress as a squad next season.
"We're delighted he has chosen to come to Glasgow and adds to our depth at centre.
"I'd like to thank Scottish Rugby for their continued investment in our squad, which allows us to bring in a player of James' calibre."
See Glasgow Warriors at Scotstoun next season with a season ticket membership!
Fourteen matches are included in the 2014/15 season ticket package - 11 PRO12 league games and three European Rugby Champions Cup matches with Montpellier, Bath and Toulouse all coming to Scotstoun next season in the top tier of European club rugby. The package includes 14 games for the price of nine and memberships start from £135 for adults, £90 for students and senior citizens and all under-18s are just £45. Payment can be made in instalments using the club's new direct debit scheme.
The deadline for season ticket renewals is 5pm on Friday 4 July and then all seats which have not been renewed will be released for general sale.
For more information on the season ticket membership packages and to buy online visit www.glasgowwarriors.org
Guinness PRO12
Suite 208, Alexandra House,
The Sweepstakes
Ballsbridge, Dublin 4, Ireland