"I am delighted to have joined Fulham and look forward immensely to the new challenge in my career," he told the club's website.
"I spent many happy years at Middlesbrough and would like to thank everyone for their valued support."
He added: "Although I had other offers from some great clubs throughout Europe, it didn't take long to make a decision about joining Fulham."
Schwarzer was offered a new deal to stay at the Riverside Stadium and had also been linked to Bayern Munich in Germany as well as a possible move to Italy.
"After stiff competition from a number of high-profile European clubs, I am exceptionally pleased that Mark has chosen to come to Fulham," added Hodgson.
"His credentials in both the domestic and international arenas are impeccable, which is reinforced by the calibre of clubs that wanted to sign him."
