Lolley, 29, is a former teammate of Socceroo Aaron Mooy at Huddersfield and played alongside the Australian in the Terriers’ 2017-18 Premier League campaign.
More recently Lolley was a part of Nottingham Forest’s successful promotion from the Championship last season, having been crowned the club’s player of the season two years ago.
The winger joins Diego Caballo, Robert Mak and Jack Rodwell as new visa players at the Sky Blues, along with veteran forward Adam Le Fondre.
“I know there’s a lot of expectation to win every season which is a great challenge, and they’ve got a fantastic plan in place to do that – which really attracted me to make the move,” Lolley said.
“I really appreciate the intent shown by the club in bringing me to Sydney.”
Lolley scored 26 goals and made 27 assists during his 170 appearances for Forest over four seasons in the Championship.
Prior to that he spent four years at Huddersfield, scoring 11 goals in 91 games for the Yorkshire-based club.
Sydney coach Steve Corica believes his new signing has all the attributes to become a fan favourite.
“We had to be patient to secure him,” Corica said.
“He brings a goal threat with his ability to cut inside and can also pick a pass.
“Fans love him because he gives his all and I know he was hugely popular at Nottingham Forest so I’m sure he will be here.”
Sydney kick off their ALM season against rivals Melbourne Victory at the rebuilt Allianz Stadium on October 8.
© AAP