The 27-year-old said he was "proud" to join the Seville-based club.
Boudebouz, who previously played for Sochaux and Bastia, scored 11 goals and made nine assists in the French top flight last season.
He has 24 caps for Algeria but missed the 2017 Africa Cup of Nations through injury.
Real Betis finished 15th in La Liga last season, but new head coach Quique Setien has bolstered his squad significantly since taking over in May, with Boudebouz becoming his eighth signing of the close season.
Spanish side Real Betis have signed Algeria midfielder Ryad Boudebouz from Ligue 1 club Montpellier on a four year deal for US$8.22m.