Gregan, who has played a world-record 127 internationals for Australia, will leave the Brumbies at the end of this season and link up with Toulon after the World Cup.
The 33-year-old is set to earn around 400,000 euros (Â£270,000) for the six months he is at Toulon, from November 1 to April 30.
Biarritz's Dimitri Yachvili, one of the current batch of France scrum-halves, said of the transfer: "It's good for Toulon to have recruited this great player. In fact, it is good for French rugby.
"I really like George Gregan. There will be more people in the crowd. I have never played against him, and it would please me to do so."
Former France number nine Fabien Galthie, who played 69 times for Les Bleus and is the current coach of Stade Francais, added: "A lot of foreigners are coming here. That could make our league more attractive.
"It's the law of the market, that's the globalisation of rugby for you.
"Currently, more people are coming into France than leaving. There is one example of a player leaving to the southern hemisphere: (Frederic) Michalak (who has signed for the Sharks for next season)."
The Gregan deal is being bank-rolled by Toulon president Mourad Boudjellal, a local businessman who has made his fortune through the comic-strip business.
He has already enticed former New Zealand captain Tana Umaga to the club for a three-month stint earlier this season - Boudjellal paid the Kiwi's wages out of his own pocket and is thought to be doing the same with Gregan.
Other big-name players to have arrived at the south-coast club include England World Cup-winner Dan Luger and former France fly-half Yann Delaigue. New Zealand hooker Anton Oliver is also expected to join in the coming weeks.
Boudjellal, desperate for the club to return to the Top 14 following its relegation from the top flight last season, wants to reinforce the team with "six, eight more players".
He claims another signing is in the pipeline, which, "after Umaga and Gregan, would be the third biggest transfer in the history of French rugby".
Gregan will be hoping to join a club who have reclaimed their place in the Top 14.
After an indifferent start to the campaign, Toulon are second in France's second tier.
Auch, who are top by 17 points, look certain to go up as champions, so Toulon will have to be content with a place in the end-of-season play-offs if they want to secure the second promotion berth.
Gregan is currently in the middle of a Super 14 campaign with the Brumbies, who he has been with for 11 seasons.
His future has been secured but the diminutive number nine, who won the World Cup with the Wallabies in 1999, is concentrating on this season.
"My sole focus at the moment is this weekend's match (against the Sharks) and the Brumbies' Super 14 campaign," he said.
"The Wallabies' upcoming Test season and the Rugby World Cup are also important goals for me this year, but right now I'm 100 per cent focused on the Super 14."