Fotuali'i, 30, is rated among the world's leading scrum-halves. He has won 13 caps for Samoa and starred during the 2011 World Cup. He moved to the Ospreys after that tournament.
Auckland-born Fotuali'i previously played for Canterbury-based Super Rugby side the Crusaders, and Northampton are understandably elated to have secured his services.
"Kahn is a player who has attracted a lot of positive headlines and attention throughout his career," Northampton rugby director Jim Mallinder said.
"We are delighted that he has chosen to sign a long-term contract to play his rugby at Franklin's Gardens, and we're looking forward to welcoming him to the club in the summer."
Ospreys chief operations officer Andrew Hore said the Welsh region had made Fotuali'i what they considered to be "a very competitive" offer to stay at the Liberty Stadium beyond this season.
"We are obviously disappointed to lose a player of Kahn's quality," Hore said.
"We made what we consider a very competitive offer to the player to retain his services, but unfortunately, he has advised us that his future lies elsewhere.
"When Kahn signed for us it was pretty much under the radar and he has thrived in our environment, playing the best rugby of his career this season, which has led to the intense interest in his services.
"Kahn was happy to stay here, but we were unable to match the salary available elsewhere, and we totally understand that it is only a short career and he needs to put his and his family's future first.
"Although this is disappointing news, the early decision from Kahn allows us to move forward positively as a business with an eye on next season and possible player recruitment.
"We will continue to look for under-the-radar signings who will offer value for money while contributing immensely to our environment, just as Kahn has.
"We are sure that Kahn will continue to serve us well between now and the end of the season as we look to retain our RaboDirect PRO12 title."
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