The 31-year-old, who is currently with the Proteas in Australia, has led his country in 94 Tests since being appointed captain in 2003.
He said: "I am excited to be joining such a professional and talented team, during what will hopefully prove to be a rewarding and successful period.
"I will balance my new role alongside my commitments to the Proteas."
Smith, who became his country's youngest Test captain when he led South Africa against Bangladesh at the age of 22 years and 82 days in 2003, helped guide them to the top of the International Cricket Council Test rankings.
The opening batsman has scored 8,314 runs at an average of 49.78 in 102 Tests, including 25 centuries.
Tests: 102 Runs: 8,314 Average: 49.78 Highest score: 277 25 centuries & 34 half-centuries Record 94 Tests as captain Smith will join Surrey after South Africa's home series against Pakistan, which will finish in late March. "When you consider the ambition shown it was an easy decision for myself and my family," he said.
"I would like to thank Surrey County Cricket Club and Cricket South Africa for giving me the opportunity to lead the side and make it possible.
"I am excited about what we can achieve at Surrey going forward and I look forward to continuing to represent my country for many years to come."
Surrey team director Chris Adams described the signing as a "massive coup".
"As well as being one of the best captains in the modern game, he is a phenomenal opening batsman and will lead by example from the top of the innings," Adams told BBC London 94.9.
"By signing a three-year deal, Graeme has demonstrated his commitment to Surrey on a long-term basis.
"I look forward to working alongside him and the rest of our hugely talented squad to bring more silverware to this club in the near future."
Smith replaces Rory Hamilton-Brown, who was released from his contract and then joined Sussex, as captain.
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