Daniels, 34, arrives at Montgomery Waters Meadow on a short-term deal until January after leaving former club Bournemouth, where he played for 10 years making more than 100 top flight appearances.
He fills the void at left-back after Town missed out on a player in that position before last Friday's deadline. Town's only previously recognised left-back, Scott Golbourne, is set for a spell out with a rib injury.
And boss Sam Ricketts, who yesterday confirmed there was room in his squad and budget for a free agent, has moved to bring considerable top flight appearance to the Town ranks with Daniels. He becomes Shrewsbury's 11th signing since the start of the summer.
Daniels, who initially came through the academy ranks and broke through at Tottenham, joined the Cherries initially on loan from Leyton Orient in 2012, before making the deal permanent, and left this summer upon the end of his contract.
Bournemouth said in a statement that the defender leaves having etched his name into club folklore in an iconic side under Eddie Howe.
The Essex-born left-back has trained with his former club throughout pre-season and joined Shrewsbury after weeks of negotiations.
Daniels made 265 appearances in total for Bournemouth, including two in the Premier League last season, scoring 17 goals. He initially joined the club while they were in League One, winning two promotions.
Ricketts said the experienced defender is a 'model professional' and wants to play a part at Shrewsbury Town.
“Charlie was at Bournemouth for nearly 10 years and went through the leagues with them. He’s been a model professional and has played at the highest level," Ricketts said.
“Last season he was playing in the Premier League. He’s someone we are delighted to have at the club. We are looking forward to working with him.
“He’s ready to get started straight away and will bring valuable experience to the team. When I spoke to him, he was really keen to play for Shrewsbury. He wants to be a part of what we are doing and was very keen to join the club.”
Daniels dislocated the patella in his left knee in April 2019. He returned well from the injury but inexplicably suffered the same injury to his right knee that August.
The experienced stopper did not play after that, including in any of the Project Restart fixtures, but despite the end of his contract with the relegated Cherries, was offered the chance to prove his fitness throughout pre-season.
It is unclear whether Daniels was registered in time for tomorrow's League One visit of Rochdale.
AFC Bournemouth chief executive Neill Blake said: “Charlie has been an unbelievable servant for this club over the past nine years.
“What he achieved for AFC Bournemouth will never be forgotten. He played such an integral part in our most successful period and his name will forever be etched in folklore here.
“With every promotion, Charlie stepped up another level and was a consistent, outstanding performer and the model professional.
“It is emotional to see another member of that iconic team leave the club but following the injuries he has suffered over the past 18 months, Charlie needs regular game time at a strong level, and I’m delighted that this contract at Shrewsbury Town will allow him to gain that.”
Daniels scored against Shrewsbury for Bournemouth in the 2012/13 League One season. He opened the scoring with a fine free-kick in a 2-1 Dean Court victory against struggling Salop in the season the Cherries went on to win promotion to the Championship as runners-up.