The 31-year-old Finn, who won the Intercontinental Rally Challenge, Super 2000 WRC and European Rally Championship in a Fabia S2000 between 2010 and '12, was confirmed as a free agent by Skoda on Friday.
He will be replaced in the Czech Republic team by rising star Esapekka Lappi, who will tackle WRC-2 (the new name for SWRC) next year.
Skoda motorsport chief Michal Hrabanek said: "I'd like to thank Juho and [co-driver] Mikko [Markkula] for their excellent performances in Skoda Motorsport colours.
"We have made fantastic achievements together and have become the most successful crew in the entire history of the brand's motorsport efforts."
Hanninen added: "My goal has always been to drive and compete at the highest level and now there is the chance with M-Sport."
He will start next season with new co-driver Tomi Tuominen after his regular navigator Markkula joined Andreas Mikkelsen at Volkswagen.
Hanninen has tackled four world championship rounds in a World Rally Car before, his best result being eighth on Rally d'Italia in a Mitsubishi Lancer WRC in 2007.
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