The former Atletico Madrid and Barcelona attacking midfielder will don the No 20 jersey, the club stated on its social media feeds.
"I'm looking forward to the new challenge. The ISL has brought football in India to everybody's attention and I cannot wait to participate in it," the ex-Benfica man said.
Revealing that the decision was to do with his several interactions with club owner and Bollywood star John Abraham, he said: "It felt that the club is one big family and that everyone would love to have me as a member."
"I'm training hard, every single day to be fitter and stronger before the season starts. Make no mistake about it, I come to India and NorthEast United FC to win."
Capdevila was also excited and said: "He has played at the biggest stage in some of the world's most premier football competitions - World Cup, Euro and Champions League. He's a winner and I'm positive that he will pass his winning mentality on to the rest of the team."
Simao began his career at the Sporting Club de Portugal, a breeding ground for talents like Cristiano Ronaldo, Luis Figo and Nani among others.
He scored 22 goals for his national team between 1990 and 2010 and also captained his country eight times.
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