Murphy represented Ireland at Schools level before switching allegiance to Canada, and at 26 years old represents a sound signing for the Exiles, who finished a disappointing ninth in the table last season, only avoiding relegation with a final day win over Bristol.
The strong runner helped Perpignan to reach the Final of this season's Heineken Cup, where the Catalans were beaten by Toulouse in Dublin, and is known to have attracted the attentions of a host of British and Irish clubs after his stint in the French league.
"I have enjoyed my three years in France, during which time I believe I have matured as a player and as a person," said Murphy, who has been capped 16 times.
"I acknowledge the excellent coaching I have received and am proud to have contributed to Perpignan's appearance in the Heineken Cup Final.
"The time has come to move on to a new challenge. I am really excited about playing in England with London Irish in front of friends and family."
London Irish managing director Conor O'Shea said of his new acquisition: "Phil Murphy's achievements with Perpignan speak for themselves.
"At the relatively young age of 26 he is among the most talented No.8's playing in Europe at present. That, together with his Irish ancestry, should make him a natural fit for London Irish.
"The combination of Phil and the evergreen Chris Sheasby means that we have strength in depth at No.8 to see us through the World Cup period and beyond."
Murphy joins a London Irish back row also containing the likes of Ireland's Kieron Dawson, as well as England's Paul Gustard and Declan Danaher.
By Mark Smith