The 27-year-old former Manchester City player is returning to the Women’s Super League after two seasons with Lyon, during which time she scored 33 goals in 53 appearances and won the 2019-20 Champions League as part of a treble.
She has netted 14 times in 52 England caps and is currently part of the Great Britain squad for this summer’s Tokyo Olympics.
Parris said in quotes on Arsenal’s official website: “I’m very happy to be here, Arsenal has an unbelievable history and I want to be a part of this.
“I want to achieve all domestic titles and compete in the Champions League here. I’m happy to be back in the WSL which has grown and improved so much since I left.”
New Arsenal boss Jonas Eidevall said: “I’m very pleased to have signed Nikita and add to our strong strike force.
“She is a talented player and has a winner’s mentality and I’m looking forward to working with her once she returns from the Olympics.”
Lyon on their official website said Parris had moved for 80,000 euros (£69,000), which could increase to 100,000 euros (£86,000).
Prior to her switch to France, Parris was the WSL’s all-time top-scorer with 49 goals across her time with Everton and City – a total that was subsequently surpassed by Arsenal striker Vivianne Miedema.
Parris, the 2019 FWA Women’s Footballer of the Year, helped City win the 2016 WSL, two FA Cups and two League Cups.
She arrives at Arsenal with the club having finished third in the WSL last season to secure a return to the Champions League.