It will be Kelly's second stint in the South, after he scored five goals in 23 appearances for the then Otago United in 2009-10.
The 34-year-old, who is originally from Scotland, has played more than 100 games in the national league, and played for Canterbury United last year.
He was predominantly used as a holding midfielder last season, but Southern United coach Mike Fridge said he could play elsewhere.
''He can play in a number of positions,'' he said.
''He was available and obviously Canterbury didn't take him on this year and we just thought he adds a lot of experience. I thought he would be a good addition to the squad, so we're delighted to have him.
''Experience is very important. I think last year there were times when we didn't that have that experience. Our players will get a good lift when they see someone like Stu Kelly with Southern United.''
Kelly is coming off an outstanding season for Cashmere Technical in the Mainland Premier League, but was not wanted by new coach Canterbury coach Willy Gerdsen this year.
He will get a chance to play against his former team in Timaru on Saturday, when Southern United meets Canterbury in its only pre-season match.
Fridge could yet sign one or two more players before the November 4 cut-off, and may be tempted to bring in another defender after Logan Wrightwebb was ruled out for the season with a groin injury.
The Caversham defender carried the ''slight'' injury all winter, but was advised by his doctor not to play summer football so it could heal.
Two other defenders, Rhys Henderson and Tyrrell Barringer-Tahiri, made themselves unavailable due to work commitments, adding to the need for more depth at the back.
Southern United's pre-season game against an Invercargill invitational team, which was postponed a couple of weeks ago, has now been cancelled.
The Dunedin-based team kicks off the national league against Waitakere United in Dunedin on November 15.
