Okada, who took Japan to the knockout stages of last year's FIFA World Cup™, was in Hangzhou, an eastern city near Shanghai, for the signing, a spokesman said, adding that further details would be released later.
"We are busy now as Takeshi Okada is in Hangzhou now. The contract has been signed this morning. There will be a press conference on December 24," the official told AFP.
Hangzhou, who finished eighth in the 16-team Super League, also posted pictures on their microblog of Okada smiling and holding a green football shirt with the number 99.
On Monday, Shanghai Shenhua announced the signing of Chelsea striker Anelka, who will arrive in the January transfer window as the Chinese league's most high-profile player.
Shanghai are also expected to unveil France's Jean Tigana as their coach in the coming days.