The USA international will now join the Toffees at the start of the January transfer window, staying on Merseyside until mid-March.
Everton officials have been in negotiations with the LA Galaxy, Donovan's MLS club, since last week and the deal is now complete, subject to a successful work permit application.
"It's all done now," said Blues manager David Moyes at Friday's press conference. "Landon will join us at the start of January,
"He will come in and add pace, he's a good finisher and has captained the USA national team so he has that experience.
"He is the first of two or three players I want to bring in in January."
Donovan, 27, is his country's leading international goalscorer and is also their most capped player with 120 appearances.
Regarded as his nation's best ever player, he won the MLS Most Valuable player and goal of the season awards for the 2009 campaign, which concluded last month.
The player has previously played in Europe for Bayern Munich and Bayer Leverkusen and joins compatriot Tim Howard at Goodison Park.
"I think the MLS is improving as a league," said Moyes. "I am sure it is not up to the standard of the leagues in Europe yet but there are some very good players.”
Indeed, some MLS exports have fared extremely well on English soil.
"Clint Dempsey is doing very well,” continued Moyes. “Tim Howard has done well for us. Brian McBride is another (example). I am hoping Landon goes out and shows us what he can do."
The arrival of the American could be the first of a group of new faces arriving at Goodison in the New Year.
"I think we need to strengthen the squad to make sure we are not in the situation we are currently in where we have so many injuries,” added Moyes.
"I really need players who can hit the ground running and make an impact in the team quickly. Hopefully Landon will be able to do that."
I'm so excited for this, I think he'll do great. He also signed a new contract with the Galaxy for 4 years, $2.25 million/year. Which is the entire salary cap for the league. (Though if he does well at Everton and at the World Cup, I have a feeling he'll move on, they've lowered his release clause too supposedly.) And I know the majority of people on here hate Landon and/or Everton, but I love him unconditionally, so haters to the left.