The 27-year-old, who played three Tests for the Springboks last year, had been expected to join England's Saracens after deciding to leave the Pretoria-based Bulls.
Potgieter, described as a "hard man" by the official Waratahs' news release, usually plays at flanker or number eight but coach Michael Cheika said he was also an option in the second row.
"In building our 2014 squad I wanted to profile one of our locks as a no-nonsense, hard and strong ball carrier and tackler, experienced and hungry to add these qualities to our squad," Cheika said.
"Jacques fits this profile perfectly and his experience in the back row also gives us extra quality in our forward depth.
"We have some excellent locks and back rows in our squad with different profiles and adding a quality recruit like Jacques to our team will definitely make for more competition within our squad, which should make us more competitive against our opponents."
The Waratahs rebounded from their worst ever year to finish a more respectable ninth in the 15-team Super Rugby standings last season, the first with Cheika in charge.