Larrazabal becomes Steven Schumacher’s sixth summer signing as Bolton prepare for their return to the Championship.
The defender arrives after the club reportedly beat competition from several sides to secure his services.
Born in Bilbao, Larrazabal came through the Athletic Bilbao academy at Lezama and made first-team appearances before enjoying spells with Real Zaragoza and Portuguese top-flight club Casa Pia.
"It's such a historical team, with great players who played here before, like Fernando Hierro, Nicolas Anelka and Jay-Jay Okocha. It's a big team with a big history and it was quite easy to take the decision,” he said.
"I think I'm a player with high speed, strength and good crossing," he added. "I'm always going up and down the field, with a lot of energy and power."