Taylor had been a free agent after ending his 21-year association with Newcastle earlier this summer when his contract expired.
The 30-year-old had been linked with a move to Turkish side Fenerbahce, but he will instead move to MLS with the Timbers.
Taylor held talks and underwent a medical with the reigning MLS Cup champions last week before the team announced the deal on Monday.
BREAKING: Timbers sign English Premier League defender Steven Taylor.http://ow.ly/3aW3302Ol5Z #RCTID
"Taylor is a player with a wealth of experience in the English Premier League and will be a good fit in our club," Timbers general manager Gavin Wilkinson said.
"This addition addresses a positional need at a critical stage of the season."
The move will see Taylor link up with former Aston Villa and Birmingham City defender Liam Ridgewell with the Timbers.
Former England under-21 international Taylor made 268 appearances, and scored 15 goals during his time at Newcastle, where he at times struggled to stay injury-free.
"Steven Taylor gives us a proven piece that can step into our backline and perform immediately," Timbers coach Caleb Porter said. "His experience and leadership will be very important to our team down the stretch."
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