The Wales scrum-half is out of contract next summer with the Welsh Rugby Union and Ospreys, but has opted for a fresh challenge in France for the next three years.
Toulon have had success in the past when recruiting from Wales, with Leigh Halfpenny and Gethin Jenkins both heading to France, and the loss of Webb is a blow to Welsh Rugby.
Webb has won 28 caps for his country, but the move abroad could jeopardise the player's international future.
The WRU's selection policy permits only four players at clubs outside Wales to play for the national side for the next two seasons, but it is a gamble Webb is clearly willing to take.
The news comes as another blow to Ospreys as Webb's half-back partner Dan Biggar will also join English side Northampton next season.