The 23-year-old was released from his Australia Rugby Union contract this month after a string of disciplinary issues and failed to agree a deal with any of his country's five Super Rugby franchises.
"Having decided that I needed a change from both a personal and playing point of view, I spoke to clubs in Japan and France, and concluded that the best way forward for my development was to move to England," O'Connor said in a statement on the club's website (www.london-irish.com).
Confirming the contract would run until the end of the season in May, London Irish director of rugby Brian Smith added: "James is a world-class player and a terrific kid and it is fantastic to have him at London Irish.
"He will bring a huge amount of experience to our group and will fit in well to our style of play. He is fit and ready to play so the coaching group will get him up to date on everything and hopefully he'll be ready to go this weekend."
He is expected to make his debut at fullback against the Northampton Saints on Sunday.
London Irish, known as the Exiles, are currently 10th in the 12-team Premiership with two wins from six matches, and also play in Europe's second-tier competition the Amlin Cup.
After the Rebels announced they would not offer O'Connor a new deal after two injury-hit seasons in Melbourne, the only Australian team interested in his signature was his former club the Western Force.
However, he ended negotiations with the Perth-based side, saying he needed a fresh start overseas.
O'Connor, who is capable of playing in any backline position, has faced a string of off-field dramas. He was escorted out of Perth Airport for drunken behaviour last month, prompting Wallabies coach Ewen McKenzie to dump him from the squad for the final two Rugby Championship matches.
"I've made many mistakes and that's how I've got myself in to that position, but I'd like to take a positive out of it," he told the Daily Telegraph.
"I've drawn a line in the sand and I want to look to the future now. Obviously, the spring tour was taken out of my hands and it's going to be tough watching the boys at the weekend, but I'm definitely going to be at the game supporting them.
O'Connor will be unavailable for Wallabies selection while based overseas.
Australia play England, Italy, Scotland, Ireland and Wales during their November European tour.
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