The 29-year old Dublin-born former Shrewsbury Town player, switches to the Cambs Glass Stadium until at least the end of the 2018/19 season.
His committed and robust playing style has made him a regular fans' favourite throughout his career, whilst his vast experience across a number of leagues will provide the U's with additional leadership qualities for the forthcoming season.
Pleased to have put pen to paper at Cambridge United, Deegan said: "Having spoken to Shaun Derry and the staff at the Club, I'm really happy with what Cambridge United has to offer and I'm delighted to be here.
"Looking at the infrastructure that has been put in place and the way the Club wants to move forward, it's something that I wanted to get on board with.
"I have played a lot of League games both at a higher and lower level and feel that I can have a real influence here. I understand what League Two is about and how competitive it can be, but I think that there is a team here that can be right up there.
"I like to see myself as a leader and I want to have a big part to play here at Cambridge United."
Meanwhile, Head Coach Shaun Derry added: "Gary is an excellent signing for our Football Club and is a real coup.
"We felt that we needed to recruit a leader of men this summer, both on and off the pitch, and Gary certainly possesses those capabilities.
"For Gary to make the commitment to us whilst having a number of other options on the table at League One, shows his desire to truly achieve here."
Deegan began his career in Ireland where he accumulated over 100 appearances for the likes of Shelbourne, Longford Town, Galway United and Bohemians.
He switched to the Football League in 2010, joining Championship outfit Coventry City and featuring on 43 occasions for the Sky Blues before injury cut his time short at the Ricoh Arena.
Deegan subsequently moved to SPL side Hibernian during the 2012/13 campaign, before returning to England and League Two with a short spell at Northampton Town and then Southend United. During his time at Roots Hall he played a key role in gaining promotion from League Two in 2014/15 and also featured 27 times for the Shrimpers in League One the following year.
More recently he has continued to ply his trade in the third tier of English Football, making 40 appearances last season for Shrewsbury Town.
Head of Football Operations, Ben Strang concluded: "With the decisions made at the end of the season, we believe that we have now made two key signings in the centre of midfield to compliment the other players in this area of the pitch.
"Gary brings invaluable experience to the spine of the team and is a winner. We're confident that the fans will respond well to his style of play and competitive edge. He has an intensity to his game that will be important for the team and is a big character to come into the dressing room."
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