The Blades released the 30-year-old midfielder in order to allow him to move to Highbury on a permanent basis.
Woolford has played more than 400 senior games for clubs including Bristol City and Millwall.
"We feel his experience will be crucial in helping the talented youngsters we have," said Fleetwood's techical director Gretar Steinsson.
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Fleetwood have signed Martyn Woolford on a one-year contract from fellow League One side Sheffield United.