The 38-year-old played more than 100 games for the Black Caps in all formats and was a key figure as they reached the 2015 World Cup final.
Bears sport director Ashley Giles said: "Grant has proven himself as a match-winner on the biggest stage.
"He top-scored in the final and semi-final of the World Cup in 2015 and has a wealth of T20 experience."
To join the county as a non-overseas player under the Kolpak ruling, South Africa-born Elliott has ended an international career in which he played five Tests, 83 one-day internationals and 16 Twenty20 internationals since making his debut against England in 2008.
He joins fellow countrymen Colin de Grandhomme, who signed for the Bears earlier this month, and Jeetan Patel at Edgbaston.
Birmingham Bears have signed former New Zealand all-rounder Grant Elliott on a Kolpak deal for the T20 Blast.