Australian ace Latham currently stands as the second highest try scorer in Wallaby history and played in every match at RWC 2007, scoring five tries to take his total to 40 tries and 200 points in 78 games for his country.
The 32-year-old started his career with the New South Wales Waratahs before moving to Queensland in 1998. He has been awarded the Australia Super 12 Player of the Year award on four occasions in 2000, 2003, 2004 and 2005.
Latham made his international debut for Australia against France in 1998 and represented the Wallabies in the last three Rugby World Cup finals.
"We're absolutely delighted that Chris Latham, the world's best full back, has decided to join us at Worcester Warriors," said Director of Rugby Mike Ruddock.
"We've made no secret of the fact that we want to strengthen the team through the acquisition of world class players and by grooming our own young players through our Academy structure. With the arrival of Chris Latham and the re-signing of Chris Pennell it shows we are determined to develop both strategies."
Warriors General Manager Charlie Little said the club had once again underlined its ambition with a huge signing that would send shockwaves around the world.
"Mike Ruddock told us he wanted to bring Chris Latham to Warriors and we have delivered," said Little. "Since Mike arrived we have shown we are moving forward with the capture of world class players, agreeing a new deal with captain Pat Sanderson and signing our best young players.
"We are building something very special here over the next five years that is very exciting. Every club is continuing to develop and we need to maintain our competitiveness on and off the field. Signing Chris Latham will add more experience, leadership, direction and professionalism to the squad and we all look forward to welcoming him to Warriors."
Latham has enjoyed a glittering career and was awarded the 2006 John Eales Medal - the first back to be awarded the medal - and in 2006 was nominated by the International Rugby Board for player of the year.
He has already impressed on English soil in the past as the star of the Northern Hemisphere versus Southern Hemisphere Tsunami Relief match held at Twickenham in March 2005 in which he scored three tries.
"My family and I are really looking forward to moving to Worcester, I am very excited about playing in the Guinness Premiership for the Warriors," said Latham.
"I have enjoyed a wonderful decade of rugby with the Queensland Reds and the Wallabies. At this stage of my life and career I feel it the right time for both my family and I to experience new things and to give myself fresh and challenging goals, as I know I am yet to play my best rugby."