Lowe joined the Owls last August but was deemed surplus to requirements following the Yorkshire side's promotion to the npower Championship.
The 33-year-old scored nine goals in 31 games for Wednesday following his move from Bury.
He told the Dons' official website: "I have just left a great club in Sheffield Wednesday, I was probably going to be limited to chances of playing football and I don't want to just sit around picking up money, I want to work hard for my money.
"There's not many clubs that I would have left Sheffield Wednesday for so I have come to this club to hopefully achieve the ambition of getting promoted this season."
The Liverpool-born frontman has signed a two-year deal and joins Jon Otsemobor in leaving Hillsborough for the Dons this summer.