Sigurdsson, 30, scored Iceland's first goal in their 2-1 win against England in the knockout stages of Euro 2016.
The ex-IFK Goteborg and FC Copenhagen defender played every minute of Iceland's games at the tournament.
Prior to joining Krasnodar in 2014, the Icelander won the Danish Superliga and Danish Cup with Copenhagen.
Despite England taking the lead against Iceland through Wayne Rooney's fourth-minute penalty, Sigurdsson equalised two minutes later before Kolbeinn Sigthorsson's winning goal.
Meanwhile, Fulham midfielder Lasse Vigen Christensen has signed a one-year contract extension, keeping him with the west London club until the summer of 2018.
Find all the latest football transfers on our dedicated page.
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Championship side Fulham have signed Iceland centre-back Ragnar Sigurdsson from Russian side FC Krasnodar for an undisclosed fee on a two-year deal.