Houllier agreed to take charge of the Midlands club just over a fortnight ago as Martin O'Neill's successor.
He revealed at his press conference ahead of Wednesday's Carling Cup tie with Blackburn that he had shaken hands with club owner Randy Lerner on the contract and that signing it was merely a formality.
And the 63-year-old Frenchman has now signed on the dotted line and formerly committed himself to Villa until the end of the 2012-13 season.
Houllier will take charge of his first Premier League game for more than six years when Villa face Wolves at Molineux on Sunday.
His last game in the top flight in England was as Liverpool boss in May 2004.