The Norway international, brother of former Liverpool midfielder John Arne Riise, has won 27 caps for his country.
He becomes Micky Adams' sixth new recruit following the signings of Joe Mattock, Shane Lowry, Marcus Bent on loan and permanent captures Neill Collins and Micky Doyle.
Riise, 27, lists Aalesund, Standard Liege, Brussels and Lillestrom as his former clubs.
He signed for Fulham under Roy Hodgson in July 2009 although he has featured in only three Premier League games for the Cottagers this season.
The move to Bramall Lane comes after he was advised by Norway boss Egil Olsen to find a club where he can play more regularly.