Capoue, who plays as a defensive midfielder but can also operate at centre-back, scored seven goals in 34 league appearances for Toulouse last season.
"Tottenham is a super club. It's the best club to continue my career,” the player was quoted as saying.
The deal is believed to be worth 11million euros (£9.5million) plus two million euros (£1.7million) in potential add-ons.
The signing of Capoue takes Tottenham's spending above £50 million in the close season with Spain striker Roberto Soldado, Brazil midfielder Paulinho and Belgium winger Nacer Chadli having already arrived at White Hart Lane.
Spurs sold Tom Huddlestone to Hull City on Wednesday while fellow midfielder Jake Livermore joined the Tigers on a one-year loan deal.