Hartlepool have announced they will not sign convicted rapist Ched Evans after boss Ronnie Moore expressed an interest.
Arsenal manager Arsene Wenger insists he will only spend money in January on the right player.
The full-back has been released from his contract at Ashton Gate, which had a year remaining, and will be registered with the Irn-Bru Third Division champions on September 1.
Foster previously spent the 2010/11 campaign on loan at Ibrox while contracted to Aberdeen.
A transfer embargo means the Light Blues must wait until September to register players, who must be free agents.
A statement on the club's website read: "Foster arguably gave his best performances for Rangers on the European stage as he featured both in the Champions League and the Europa League at right wing-back.
"In total, he made 24 appearances which he will now add to as the forthcoming Second Division campaign progresses."
The 27-year-old made 51 appearances for City.