The 26-year-old, who is capable of playing on the wing, at full-back or at centre, made his third international appearance for the Wallabies in 2016.
He has played for Super Rugby sides Western Force and Queensland Reds, as well as sevens rugby for Australia.
"Luke is an impressive player with excellent technical abilities and a lot of raw pace," interim head coach Mark Tainton  told Bristol's club website.
"We were really encouraged by Luke's attitude and enthusiasm throughout the recruitment process."
Morahan added: "I'm excited about the opportunity to play in England, but also to be a part of the ambitious journey that Bristol Rugby is on.
"I am confident that everything is in place at Bristol for us to be a successful club."
Bristol have signed versatile Australia back Luke Morahan for next season.