Larsson was released by the Black Cats after its Premier League relegation, having made over 200 appearances in six seasons at the club.
The 90-cap Sweden international is the sixth arrival at the KCOM Stadium as Leonid Slutsky plots a return to the top flight, with the Tigers having joined Sunderland in suffering the drop last term.
"I'm delighted to be here and I am really looking forward to this fresh challenge," Larsson told the club's official website.
"I had some options to consider, but I felt this was the best move for me to make and I can't wait to get started now."
City began its season with a 1-1 draw at Aston Villa on Sunday (AEST).