Klasnic scored eight Premier League goals on loan from Nantes last season and Owen Coyle has been working hard to take him back to the Reebok Stadium on a full-time basis.
The Trotters boss had initially hinted Klasnic's wage demands would prove too high but the 30-year-old has now put pen to paper despite interest from other clubs.
Klasnic's arrival follows that of Marcos Alonso last week and the signings of Martin Petrov and Robbie Blake earlier in the summer.
Klasnic told the club's website: "I'm really pleased to be here now that everything is done.
"I spoke to the manager - he wants to work with me and I want to work with him. It was an easy decision to come back to Bolton."
Klasnic was brought in by previous manager Gary Megson but impressed his successor Owen Coyle enough for the club to want him to stay.
He returned to Nantes at the end of his loan but had his contract with the French club cancelled earlier this week.
Hamburg-born Klasnic began his career with German side St Pauli before going on to spend seven years at Werder Bremen and then join Nantes two years ago.
He has won 38 caps for Croatia and scored 12 international goals.