"Xavier is an outstanding player and proven leader of men having guided the Auckland Blues to Super 12 success in 2003," Cardiff chief executive Robert Norster said on the club's website, cardiffblues.com.
"We are thrilled and delighted that he joins us against significant competition from many sides throughout the rugby playing world."
Rush was first selected for the All Blacks as a 21-year-old to play Australia in 1998 and played the last of his eight Tests against South Africa last August.
Cardiff Blues director of coaching, David Young, added, "We had identified his many qualities both as a player and leader and were very keen to complete negotiations for him to join us.
"He is an extremely focused competitor who has the necessary experience, but is still a young man with a tremendous appetite and enthusiasm for the game."
Rush joins flyhalf Carlos Spencer (Northampton), prop Dave Hewett (Llanelli) and New Zealand's most capped scrum-half Justin Marshall (Leeds) in the exodus north.
Also, former All Blacks captain Rueben Thorne and prolific points scorer Andrew Mehrtens and lock Norm Maxwell are also considering moves to Europe.
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