The former Manchester United and England goalkeeper is the latest high-profile signing since Ryan Reynolds and Rob McElhenney became owners of the Welsh club.
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Foster, who will be 40 in April, is starting a second spell at Wrexham having previously played for them 18 years ago, on loan, in 2005.
The former Premier League shot-stopper played for Man United, Birmingham, West Brom and Watford.
He had previously been a target for Tottenham, who were keen to secure the services of the experienced goalkeeper as cover for Hugo Lloris, but a move was blocked by the Premier League.
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Eddie Howe's Newcastle were also in the running to sign Foster but in the end they recruited former Liverpool goalkeeper Loris Karius.
On returning to the Welsh outfit, Foster said: "I'm over the moon. I've been at the Club an hour this morning and it seems a really nice place. Everyone is down to earth and the manager's top class.
"It's changed a lot since I was last here, but it's nice to be back and it's nice to be back as a player too. It will be interesting to see how my body feels after training today! I'm looking forward to getting started.
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"The first time I was here, it was genuinely the springboard to the rest of my career - on the back of the loan move, playing in the LDV Vans Trophy Final at the Millennium Stadium, I got my move to Manchester United at the start of the next season. It was absolutely bonkers!
"'If you'd told me 18 years ago that I'd have gone on to have the career that I have had, I probably wouldn't have believed you to be honest so I do owe a lot to Wrexham."
Foster has been without a club since the end of last season when he left Watford following their relegation to the Championship.
He will now replace injured goalkeeper Rob Lainton but also intends to continue with his YouTube channel The Fozcast.