Lucas Silva is unlikely to join Real Madrid in January with the Spanish giants not planning to make any transfers.
Ravel Morrison has returned to parent club West Ham from Cardiff City on compassionate leave.
The 28-year-old, who joins on a two-year deal from Brentford after spending last season on loan at Dundee United, becomes Hibs’ second summer signing following David Gray’s arrival last week.
El Alagui is excited about the move and is confident he can provide the goals Hibs lacked last season when they managed just 31 in 38 league games.
"I'm really happy to be at Hibs and I'm excited about the challenge ahead,” El Alagui told the club's official website.
"We will be doing everything we can to make sure we get back into the Scottish Premiership.
"As soon as I came here, the move felt right and I felt good about playing for Hibs."
El Alagui had options, with St Johnstone and Dundee also in the hunt for his signature, but chose Hibs after being impressed by head coach Alan Stubbs and his vision for the club.
"When I met Alan, I was impressed because he is young and enthusiastic and he wants to bring something new to the club,” he said.
"I think the Scottish Championship will be a very exciting league next season and I'm looking forward to playing for Hibernian.
"I had a few other offers to consider before I chose Hibernian. I thought this was the most exciting challenge and it was very clear in my head that I wanted to be here."
Stubbs was delighted to be able to sign El Alagui and said he is targeting other quality signings to add to the squad.
"We're delighted with the news Farid has decided to join the club - he will be a great addition to the club and his arrival has given everybody a lift,” Stubbs said.
"We've had to fight off competition from Scottish Premiership clubs and also competed with clubs from down south in order to bring Farid here to the club.
"I'm thrilled that he has seen the potential and, after we had a chat, he bought into my vision for Hibernian and the direction where we want to go.
"We've mentioned before that we want to add quality players to the squad and El Alagui’s arrival is the type of signing we're aiming to introduce this summer.”
El Alagui is expected to make his Hibernian debut in Tuesday's friendly at Dunfermline.