The Scotland international forward has been without a club since his summer departure from Birmingham, who were relegated to the Championship last season.
He had trained with Wolves, and both Mick McCarthy's side and Celtic were keen on signing the 28-year-old.
However, McFadden has opted to link up again with Everton manager David Moyes on Merseyside in the hope of reviving a career hit by injury.
It is understood Everton have signed the Scot until the end of the season.
Source: Team Talk
Source: Team Talk