The 26-year-old, a product of Manchester United’s academy, had been a free agent since leaving Tranmere at the end of last season.
An experienced campaigner with more than 200 senior appearances, he offers Saddlers boss Matt Taylor another option in the middle of the park.
“I am really happy to be here,” said Khan. “Walsall is a massive club and this is a great opportunity for me and I can’t wait to get going.
“This is a great club; the fans are great and I know quite a few of the lads in the changing room so that always helps.
“The way the manager plays, he showed me a presentation on how he plays and I went down and did a week of training and I loved everything about it.
“The way he works, the formations, the players, just everything really it was all a great fit.”
Khan made his senior debut for Sheffield United in 2014 before joining Yeovil two years later.
His career has also included a loan spell at Newport County while he featured 49 times for Tranmere last season, including the League Two play-offs.