The Uruguay international has been without a club since leaving Juventus at the end of last season and rejected an offer from AC Milan earlier this month.
The former Barcelona and Sevilla centre-half has signed a deal at St Mary's until the end of the season and the 29-year-old will be keen to make a mark at Saints.
The defender has not made a competitive appearance since February 2016 after suffering a ruptured Achilles tendon but has previously stressed he is fully fit and he should be able to force his way into the Southampton side, due to Virgil van Dijk's ankle injury.
Caceres has revealed he had a number of options but decided on Southampton and the Premier League.
“I am very happy to have signed for what is an important club in English football. I am looking forward to getting started with my new teammates," he told the club's official website.
"Of all of the options that I had, I think that the best option for me was to come to Southampton. I am extremely happy to have joined this club."
Southampton executive director of football Les Reed moved to dispel any conerns over Caceres' fitness after his lengthy spell on the treatment table last term and he is convinced the Uruguayan can play a key role in the remainder of the campaign.
He said: "Recruiting players in January is an extremely difficult task, and this year was a particularly challenging market for centre-backs."
He added: "In a tough situation for us, losing Virgil to injury, he will bring experience, talent and character. He has played in the biggest of games, and will provide depth to our squad.
"Two days of extensive medicals and tough fitness tests have further demonstrated his desire and positive personality. I know Martin can’t wait to start playing again. We welcome him to St Mary’s, and his family into our family.”
Southampton's next fixture is the EFL Cup final against Manchester United on February 26, with their next Premier League assignment a trip to Watford on March 4.