The 35-year-old joins the Lakesiders after being released by Town last month.
His future has been up in the air after he told the Shropshire Star in January he was considering retirement – before then leaving the door open on his career.
Now, the midfielder has decided not to hang up his boots and move across the border.
Bala manager Colin Caton said: “It’s great to have Dave Edwards on board, he’s an unbelievable signing and an unbelievable capture for the club. We had a couple of good chats but never thought he’d be interested in the Cymru Premier.
“He was sort of deciding whether he was staying full-time or part-time. He was obviously interested in playing part-time so I sent him a message earlier after the season had finished to give him time to think about it.
“To get him on board is absolutely fantastic, he’s played with Chris Venables before and he knows a couple of the lads like Antony Kay who he’s played against in the leagues. He was a pleasure to deal with, and he’s going to add so much to us as a player, as a person, and his knowledge, and his experience around the dressing room is going to be second to none.
“It’s a great capture for us and a pleasure to have him joining the club.”
The former Wales international made more than 500 league appearances in his career, which included two spells at Shrewsbury and a nine-year stint at Wolves.