Defoe, 31, first joined Spurs from West Ham in February 2004, making 177 appearances and scoring 64 goals before joining Portsmouth four years later. He moved back to White Hart Lane a year later and hit 78 goals in 185 games.
He told the club website: "Everybody knows how much this club means to me and I will play my heart out for the team and the fans until my last kick for the club. I have had a fantastic time here and the fans have always been amazing to me.
"I am grateful for the opportunity for myself and my family to experience living overseas and for me to play in the MLS with a contract that will take me to the age of 35.
"I have no doubt I shall be coming back as a fan supporting the team in the years to come too."
Tottenham head coach Tim Sherwood hinted he does not expect to enter the transfer market to replace Defoe, adding: "This is a great opportunity for Jermain and he feels it is one that he wishes to pursue. He has played a big part in the club for many years and we all know he will give his best until his last minute in a Spurs shirt.
"We have several attacking options within our squad for the remaining dozen or so games of the season after Jermain departs and we shall keep our options under review.
"We also have a goal threat from players in other areas of the pitch including having wide players and attacking midfielders who will enable us to vary our shape when required."
Toronto boss Ryan Nelsen had cooled reports of Defoe moving to Canada by claiming that Spurs had received several offers for the England striker from English Champions League clubs.
But he is expected to be paraded by Toronto on Monday after signing a four-year deal worth a reported £90,000 a week in what is one of the biggest deals in MLS history.
Spurs have also announced they will play Toronto in a pre-season friendly on July 23.
Toronto have also signed USA international midfielder Michael Bradley from Serie A side Roma.
Bradley, who has played across Europe for Heerenveen, Borussia Monchengladbach, Aston Villa and Chievo since leaving the New York/New Jersey MetroStars in 2005, will also be unveiled as a Toronto player on Monday.