Simon, who is Central Coast Mariners' all time top goal scorer with 45 goals in 144 games, played under Arnold from 2010 to 2012.
He will join the Sky Blues on a permanent basis after trialling with the club for the past fortnight.
“I’m excited to have signed for Sydney FC and I’m hugely thankful to have been given the opportunity by the club,” Simon said.
“Last season was a tough year, I missed all of pre-season due to personal reasons and had a couple of injuries towards the end of the year, so was disappointed to be released.
“I see this as a fresh start and with a full pre-season under my belt, I’m confident I can produce my best form playing for one of Australia’s premier clubs.
“Competing for three trophies, including the Asian Champions League was a huge lure in joining Sydney FC and I can’t wait to play in front of their fantastic members and fans at Allianz Stadium.”
Simon joined the Mariners in 2006 and scored 36 goals in 114 A-League apppearances, before signing a three year contract at K League Classic side Jeonnam Dragons.
However, his time in Korea failed to bear fruit, and Simon made only six league appearances, without finding the back of the net.
The Cental Coast local returned to the Mariners in June 2013, this time under the tutelage of Arnold's former assistant, Phil Moss.
Simon scored twice in 25 A-League appearances in his first season back, but only played four times last season, scoring three goals.
The Mariners announced in March that the 29 year-old was going to be released after eight seasons at the club, despite Simon and the club being in negotiations over a new contract.
Arnold had no qualms signing on the centre forward after he impressed on trial.
“Matt is quality player and has exceptional personal attributes as well. He gives us something completely different to what we already have up front and he has done extremely well for us in the last two weeks," Arnold said.
“He is aggressive and strong, his attitude is first class and I’m sure he’ll be a success at Sydney FC this season.
“Competing across three competitions this year we need depth across all parts of the field and I’m confident he will complement our squad.”
Simon scored the first goal in a trial game against Macarthur Rams, which Sydney FC went on to win 5-1.
Simon, who has two caps for Australia, will provide depth up front to a Sydney FC squad which already boasts the A-League's all-time second top scorer, Shane Smeltz, as well as club captain Alex Brosque, and new signing Filip Holosko.
