The 17-cap Welsh international left Wasps by mutual consent last week, following his involvement in a bar brawl.
Powell, 29, has made 21 appearances for Wasps this season, scoring one try. But he was involved in an altercation with football fans in the Walkabout pub in Shepherd's Bush on 18 April that resulted in him being knocked unconscious and requiring 10 stitches in a head wound.
But the powerful ball-carrier has been handed a second chance and will travel north to join the Sharks for the beginning of the 2011-12 season.
"It has been a tough couple of weeks for me but that has gone now and I am looking forward to a new challenge at Sale," Powell told the Telegraph.
"There was a bit of interest from other clubs but I have been really impressed with what I have seen at Sale."
Sale executive director of sport Steve Diamond reckons Powell's signing will be a major boost for a side which finished third bottom of the table in the 2010-11 season.
"This is a huge signing for us," said Diamond.
"Andy has tremendous experience, is one of the best ball carrying forwards in world rugby and is one of the final pieces in the jigsaw as far as our recruitment goes for next term."