The 24-year-old, who came through the ranks at Wasps, will return to England at the end of his commitments with Super Rugby outfit Melbourne Rebels.
Cipriani made the move to Australia in 2010 in a bid to kick-start his career - with the talented No.10 having been frozen out of the international set-up by then boss Martin Johnson.
However Cipriani, who made his senior debut for Wasps as a 17-year-old in 2004, returns to England determined to add to his seven caps.
Sale chief executive Steve Diamond said: "Quality signings such as Danny Cipriani and Richie Gray are a massive statement of intent from the Sharks, as we aim to become a 'Super Northern Club'.
"Danny has been targeted by many European clubs, but has chosen to be based in Manchester, as he feels that the Sharks give him the best opportunity to fulfil his aspirations to be the No. 1 fly-half in England by the time of the 2015 Rugby World Cup."