The 28-year-old Icelandic international passed a medical and officialy joined the Pittodrie side on Monday.
However the paperwork was held up due to previous club Plymouth Argyle's financial difficulties and the unusial circumstances of his departure from Home Park.
The midfielder was sacked by Plymouth Argyle because of a wage dispute.
Dons boss Craig Brown said on Monday: "He'll add to the strength of the team. I think we're getting a strong Aberdeen team. That's my hope anyway."
"He is a very important player. He is so composed on the ball and so versatile and has a very good presence - he's a big fella."