The 30-year-old Republic of Ireland international Duff was given permission to speak to the Cottagers over the weekend after the two clubs agreed an undisclosed fee which is believed to be in the region of £4million.
Duff started his career at Blackburn under then Rovers and now Fulham boss Roy Hodgson.
"I am delighted to add a player of Damien Duff's calibre to our squad and welcome the further midfield options he provides us with," he told the club's official website.
"I have known Damien for over a decade since he broke into the first team at Blackburn when I was manager, so I'm fully aware of his qualities and I am looking forward to working with him again. "
Duff is returning to west London with the Cottagers following a three-year spell at Chelsea prior to joining the Magpies in 2006.
Kenny was suspended by Sheffield United in the summer after a drugs test found traces of ephedrine in his system.The keeper claimed that it must have come from an over-the-counter cold remedy and he now faces an FA disciplinary hearing.
The defender Andre Bikey has left Reading for the Premier League side Burnley.
Bikey, 24, is a Cameroon international and has signed a three-year contract after moving for an undisclosed fee.
Watford have signed the 20-year-old midfielder Tom Cleverley on loan from Manchester United.
Swansea City have rejected a bid from Wigan Athletic for the midfielder Ferrie Bodde.