The 6ft, 104kg back rower earned his first Ireland Wolfhounds cap against Scotland last year and his commitment to Connacht will see him play at the Sportsground until at least the summer of 2014.
Voted Ulster Academy Player of the Year in 2009, Faloon won the All-Ireland Cup with his native Ballynahinch and went on to earn his first Heineken Cup cap for Ulster against Bath in the same year.
Now with 14 appearances in the Heineken Cup and 33 caps in the RaboDirect PRO12, Faloon has built a reputation as an abrasive ball carrier.
A genuine openside flanker, his work-rate across the pitch has helped Ulster reached the quarter-finals of the Heineken Cup this season and his addition to the Connacht set-up is further proof of the hard work being done off the field to bolster the squad for the coming years.
Speaking about the signing, Connacht head coach Eric Elwood said: "Signing Willie is a big step for us, he will join an already strong pack here at Connacht and his experience and work-rate will add an extra dimension to our gameplay.
"He's an athletic, aggressive ball carrier in the mould of a traditional number 7 and alongside his phenomenal work at the breakdown I know he will be a major asset to the province."
Faloon added: "I'm really looking forward to the move to Connacht next season to challenge for regular game-time.
"After speaking with Eric I was in no doubt as to the direction he wants to take Connacht Rugby and I'm happy to be part of that plan."
Faloon's signing comes hot on the heels of the recent high profile acquisitions of Dan Parks and Nathan White and these big name arrivals, coupled with the retention of the best of Connacht's homegrown talent, will provide a timely boost as Connacht are set to launch their Season Tickets in the coming days.