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.
Nelsen, a former Spurs team-mate of Defoe, said: "I think if you ask any Premier League club then they would take Jermain right now. I know Tottenham are getting offers everywhere for him - for his services at the moment - and from top-four clubs in England at the moment as well.
"I know Jermain, I know his ability, I know his character.
"All I can say is if a quality player like Jermain Defoe graces the MLS it will be an amazing coup for the league."
Defoe has spent nine years split across two spells with Tottenham, where his tally of 142 goals ranks him fifth among the club's all-time leading scorers.
He has scored nine this season but all but two of those have come in the Europa League, with Roberto Soldado and, more recently, Emmanuel Adebayor preferred in the starting line-up.
Reports in Canada claim that Toronto will pay Spurs around £6million for Defoe, whose current deal had 18 months left to run.
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.
It has also been confirmed that USA international midfielder Michael Bradley will be joining Defoe in Toronto.
Serie A side Roma have announced that they have agreed a deal with the MLS for Bradley, who like Defoe, is set to be unveiled as a Toronto player on Monday.
The 26-year-old has played across Europe for the likes of Heerenveen, Borussia Monchengladbach, Aston Villa and Chievo since leaving the New York/New Jersey MetroStars - now the New York Red Bulls in 2005.