The 29-year-old ex-Liverpool and Real Madrid striker's contract with Newcastle ended earlier this week.
"Michael is a world-class forward with a proven goalscoring record at the highest level," said United boss Sir Alex Ferguson.
Owen had also been linked with Everton, Aston Villa, Stoke and Hull.
But instead he becomes United's second summer signing after the recent addition of Antonio Valencia from Wigan.
See i have signe for two years
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