The 32-year-old played 12 Tests for the All Blacks in 2003 and was capped by Australia and Queensland at rugby league.
The agreement leaves him open, and likely, to be selected for the Crusaders in their 2008 Super 14 squad announced later this month.
"The thing that really pulled at me was the chance to have another crack at a Super 14 title," he told The Christchurch Press.
"I played in two finals and lost both of them."
Thorn is also open to an international return with the All Blacks.
"My focus is on the Super 14 title, but I always said if I can play at the highest level I will," he added.
Dethroned champions Waikato, meanwhile, have announced four more departures from their squad.
Veteran Chiefs flanker Steven Bates and Roy Kinikinilau, the former Wellington, Highlanders and Chiefs winger, will play in Japan next year.
Utility back William Ripia will join Taranaki, while back-rower Steven Setephano will head to Otago, who in turn have lost Highlanders prop Chris King to Southland.