Reo-Coker becomes Bolton's second signing of the summer, former Swansea midfielder Darren Pratley being the other.
Reo-Coker told Bolton's official website: "I spoke with the gaffer and he outlined his plans and how he wants the club to progress.
"I want to be part of that and I'm looking forward to meeting up with the lads and getting to work."
Bolton boss Owen Coyle said: "We're delighted to have signed Nigel.
"He's got the quality, drive and desire to compete at the highest level in the Premier League and I'm delighted that we have been able to bring him to the club."
Croydon-born Reo-Coker, who joined Villa for £8.5million from West Ham in 2007, started his career with Wimbledon.