TFC were after the Argentine striker for much of the 2013 season but after just two MLS matches with the Canadian side, has been moved on in exchange for forward Bright Dike, a first-round pick in the 2015 MLS SuperDraft and allocation money.
Urruti, who joined TFC from Newell's Old Boys last month, will bring plenty of attacking quality to the Timbers squad according to head coach Caleb Porter.
"Maximiliano is a player we know well, one we feel will be a great fit in our system and scouted extensively prior to him signing with Toronto," said Porter.
"He is a quality, young player who has cut his teeth with one of the top clubs in the Argentine first division. Urruti will complement the depth we have in the striker position, and once he is acclimated and match fit, will bring a dimension to the number nine role that we've been looking for."
As Urutti arrives, 26-year old Dike departs Portland after scoring six goals in 23 appearances for the Timbers.
"Anytime you trade a player that is of the character and ability as Bright Dike, it's not an easy decision," added Porter.
"But, we felt this was the right move for our club, short- and long-term. This will be a great opportunity for him to contribute immediately to Toronto FC, and we know he is looking forward to the next chapter in his career."