Hierro spent last season in Qatar, following his exit from Real Madrid, but the 36-year-old clearly feels he can still perform at the top level as he returned to Europe to find a club.
Trotters chief Sam Allardyce, never afraid to take a gamble on big name players who are in the autumn of their careers, offered Hierro a deal at The Reebok Stadium.
After mulling over his options, Hierro penned the one-year contract on Tuesday - much to the delight of Allardyce.
"Fernando signed a contract yesterday," Allardyce told Sky Sports News. "He did some tests the other day which were fine.
"A lad of his experience will be a huge addition to his squad.
"We put all the finances in place a few days ago, he signed yesterday and should join us on Friday after he has returned from Spain with his family."
Allardyce is looking to use Hierro sparingly, as he added: "I wouldn't expect 38 games out of him at his age, but what I am getting is a player who has been world class all his life and I will look to use that experience at the right time and he will be invaluable around the place."
Hierro is best known as a commanding centre half, but he could well be asked to operate in the middle of the park.
"Many people in the game know him as a defender but he has played most of his career as a midfielder and we now have the flexibility of playing him in those two areas," added Allardyce on the club's website.
In a second deal, Bolton have completed the capture of Israeli international Tal Ben Haim.
The 22-year-old defender has signed a three-year contract, having impressed during a trial spell, and will link up for the start of the season once he is granted international clearance.
