Yarde, 30, who made the last of his 13 Test appearances in June 2017, had been without a club since the end of last season.
"Can't wait to get started," Yarde said on Twitter following the announcement.
In September, Yarde issued an apology eight months after he was arrested for a "very serious offence.
"A necessarily lengthy police investigation followed but I can now confirm that no further action is to be taken against me," he said on Twitter.
"I have not been charged with any offence," he added.
Yarde began his professional career with London Irish before moving to Harlequins and Sale.
He scored two tries on his international debut in a 51–26 victory over Argentina in Buenos Aires in 2013. He went on to score eight tries in his 13 Tests for England.
He featured for the invitational side the Barbarians in November and could make his debut for Bayonne as they host Toulon next weekend.
