The 27-year-old will join the Top 14 side on a three year contract after this year's World Cup.
The player, nicknamed Bang Bang, had denied in April that he had sealed the move to France but has now confirmed the switch, adding he is looking forward to the challenge ahead.
McAlister, who previously played for two years in England with Sale, said: "The opportunity to play French rugby and live in France with my partner and children will be something totally different to what we're all used to, but it will be an exciting new chapter in our lives."
A number of clubs had been interested in signing McAlister, who currently has 30 All Black Test caps.
Currently plying his trade with the Blues, McAlister scored a try in their crunch 33-16 victory over the Highlanders on Friday, which the Blues had needed to win to be certain of a place in the Super Rugby play-offs.
Toulouse have also signed Australia scrum-half Luke Burgess as well as South African Gary Botha and his fellow Springbok front rower Gurthro Steenkamp for next season.
Gilbert has released a new line of rugby cleats. The Gilbert Virtuo 8S is part of the exciting new product. Check it out.
The entire All Blacks apparel line has been updated for 2013/14. Check out the New Zealand All Blacks polo.
The Nike Tiempo is a solid rugby cleat and one of few styles still made from full-grain natural leather.
The Gilbert Blitz 8S rugby cleat is a great cleat at a great price of $69.99. Get a new pair of cleats today.
A cool looking all black rugby cleat with the high performance adidas is known for. Get in the Gear!
Wear the crest of the British and Irish Lions on your t-shirt. A great look for the summer.
The All Blacks Performance t-shirt is black with hints of blue from the training jersey. Very Cool.
The New Zealand All Blacks training jersey for 2013/14. Get in the Gear!
The USA Rugby Pro Alternate rugby jersey is perfect for any fan of the Eagles. Get yours to wear during the summer Test matches.
The NEW All Blacks 2013/14 jersey has arrived at World Rugby Shop. Dare to wear the colors of the All Blacks.