Forest, owned by Kuwaiti family the Al Hasawi's, have made a small piece of transfer history with the signing as Al-Rashidi becomes the first man from his country to join a club in England.
The 25-year-old has signed a two-and-a-half year contract after arriving at the City Ground on a free transfer from Al Arabi.
He told the club's official website: "It's an enormous honour for me to be the first Kuwaiti to play in England.
"I'm looking forward to the challenges that lie ahead and getting to know the Championship."
Al-Rashidi, who spent a month training with Forest last summer, is expected to go straight into manager Alex McLeish's squad when he takes the Reds to his former club Birmingham on Saturday.
"It will be good to look at him in close quarters, rather than watching him on video," said McLeish.
"We are hopeful he will be available to go on the bench on Saturday. Then we can integrate him in training and see what he can do."
The club have also confirmed that striker Dexter Blackstock and Radoslaw Majewski have signed new deals.
Blackstock has penned a four-and-a-half-year contract while Polish playmaker Majewski has put pen to paper on a three-and-a-half year deal, subject to successfully completing a medical.