The 29-year-old midfielder has penned a two-year contract with Monaco with the option of a further year on top, the newly-promoted Ligue 1 club have announced on their website.
Toulalan, who will be presented by his new club on Monday, joins the likes of Radamel Falcao, Ricardo Carvalho, James Rodriguez and Joao Moutinho as new arrivals at the big-spending Monte Carlo club, who are bankrolled by ambitious Russian owner Dmitry Rybolovlev.
Monaco sporting director Vadim Vasilyev said on his club's website: "We are happy with the signature of Jeremy. His skills, his European and international experience, will be an important asset for our team this season."
Toulalan joined Malaga from Lyon in 2011 and played 57 competitive matches for the Primera Division outfit.
The former Nantes player has won 36 caps for France.