The defender will join Newcastle on July 1 when he comes off contract at Bournemouth.
Kelly will sign a long-term undisclosed contract.
He said: “It's amazing to be coming here. I know how big the club is and how much it means to all the fans, and I just want to hit the ground running and get to work.
“It’s a big move for myself and the family - of course being down south is a bit different - but I think the city of Newcastle is amazing, with the contrast between city life and the countryside.
“It wasn't a hard decision for me to come here. Working with the gaffer previously, I know what he wants from his players and how he wants his players to play, and I think with what I can bring it just makes sense. I just can't wait to get started.”
Toon manager Eddie Howe said: “I’m really pleased to have secured Lloyd’s signature. He’s a player who’s proven himself at Premier League level and I’m certain he’ll be a great addition as we prepare for the new season.
“Lloyd is a player I’ve admired since the early stages of his career. Alongside his undoubted defensive ability, he brings versatility and leadership qualities that I believe will make him a great fit within our squad and somebody our supporters will quickly take to.
“He has plenty of Premier League experience already under his belt, yet Lloyd’s at an age where he can still develop. He has a lot of potential and I’m really looking forward to working with him again.”