The 29-year old spent the last two years in Switzerland having joined from Brondby IF in 2011 and he has joined the Italians on a three-year deal.
Farnerud has eight caps for the Sweden national team and he becomes Torino's first arrival of the summer, as announced on their official website.
"We are pleased to announce the permanent signing from Young Boys for Alexander Farnerud," a statement reads.
"The Swedish midfielder has signed a three-year deal."
Torino have also renewed their co-ownership of Brazilian striker Paulo Vitor Barreto with Udinese, meaning he will remain a part of Giampiero Ventura's squad for the forthcoming campaign.