According to media reports, the deal is estimated to be worth more than 100 million euros (£86 million).
"I am excited to experience a new football league in a different country. I have been fortunate to achieve amazing things in my career and achieve everything I can in Spain and Europe," the 35-year-old Benzema said.
"It now feels the time is right for a new challenge and project... I am looking forward to joining my new teammates and, together with them, help take this amazing club and the game in Saudi Arabia to new levels."
Al-Ittihad last month clinched the Saudi Pro League title for the first time since 2009.
"Benzema's arrival is the most impactful transfer in the club's history to date," Al Ittihad said in a statement.
"It also marks another huge step in the Saudi Pro League’s journey to become one of football's leading destinations for the world’s very best after its biggest season to date."
At Real, Benzema won the Champions League five times, four La Liga crowns and three Spanish Cup trophies, as well as five Club World Cups and four UEFA Super Cup titles.
