The 35-year-old defender, who spent three seasons at Real Madrid before his switch to Claudio Ranieri's side, completed his move to the Principality on Tuesday where he will join Joao Moutinho and James Rodriguez, who recently completed a €70m switch from Porto.
Carvalho told the official club website: "I'm very happy to join Monaco and to be part of the new adventure. This is a new challenge for me."
The newly-promoted Ligue 1 side backed by Russian billionaire Dmitry Rybolovlev are also close to finalising a deal for Atletico Madrid striker Radamel Falcao, who was in Monaco for a medical on Tuesday, and Barcelona goalkeeper Victor Valdes is reportedly close to sealing a move.
Carvalho was in the Champions League-winning Porto side which beat Monaco 3-0 in the 2004 final.
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