The 27-year-old moves to Bloomfield Road as a free agent after his 11 years with the Toffees ended in July.
Garbutt spent much of the past decade out on loan and made just five Premier League appearances for Everton after coming through the club's academy.
"He will bring experience to a youthful group," said Blackpool boss Neil Critchley.
"I very much look forward to working with him, as he will be a vital member of our squad this season."
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