The 29-year-old New Zealand international, who has missed only four games in his two seasons in Super League, will be reunited with former Wigan head coach Michael Maguire at the Rabbitohs.
"Jeff has been a very consistent performer right throughout his career and will bring a wealth of experience to our club next season," said Maguire, who is in his first season at Souths.
"He has a great work ethic, is professional in the way he conducts himself around training and in his preparation to play and has been a high-level performer week-in and week-out since I've been working with him."
Lima, who won six caps for the Kiwis, lifted the Lance Todd Trophy as man of the match in Wigan's victory over Leeds in the 2011 Challenge Cup final under Maguire.
He made his debut for Wests Tigers in 2004 and reached three Grand Finals with Melbourne Storm from 2006-10.
"His experience will help the youth in our squad," added Maguire. "He's a big addition to our team and will help to further strengthen our forward pack.
"I'm looking forward to welcoming him to our club for next season and beyond."
Lima joined Wigan along with Melbourne team-mates Brett Finch and Ryan Hoffman for the start of 2010 and the Warriors are likely to be without all three from next season.
Hoffman left after 12 months to re-join Storm and Finch, like Lima, is out of contract and is also being tipped to link up again with Maguire.