The 26-year-old centre-back becomes manager Andre Villas-Boas' first January recruit in a deal worth ?7 million ($10.7m), following a fortnight of wrangling over the player's personal terms.
The parties reportedly settled on wages of ?80,000-per-week on Friday, ?20,000 less than Cahill was said to be demanding.
The player told his new club's official website, www.chelseafc.com: "Chelsea is a massive club, it is a club that looks to win trophies season in, season out and it is a big opportunity for me to be a part of that.
"Opportunities like this, you can't turn down."
Despite being part of a Bolton defence among the worst in the Premier League this season, Cahill has performed well alongside Chelsea captain John Terry at international level.
Arsenal and Tottenham had also been interested in signing Cahill, but Chelsea were the only serious January transfer window bidders, with Bolton opting to cash in on a player in the final six months of his contract.
A fee was agreed at the end of last month but negotiations with the player immediately hit a snag when Villas-Boas revealed club and player were "miles apart" in terms of Cahill's salary.
Reports suggested that gap was ?30,000, with Chelsea determined not to be held to ransom as they seek to slash their overall wage budget.