"We hope Sunil is with the Kansas City Wizards family for many years to come," club spokesman Greg Cotton said in a statement without giving details of the contract.
Indian media said the 25-year-old had inked a four-year deal with the team after his successful trial with them earlier this month.
"As per league and team policy, we do not discuss the terms of any player contracts," Cotton said.
India's top player missed an opportunity to play for English Championship (second division) club Queens Park Rangers last year after being denied a work permit by the British government.
The club said Chhetri has agreed in principal to terms with Major League Soccer, pending his P-1 Visa and ITC approval.
Chhetri would be unavailable to play in Kansas City's opener versus D.C. United at home on Saturday, the statement said.
"I'm looking forward to the opportunities I'm going to get," Chhetri told Indian media on Saturday.
"Coming from a nation ranked number 132 in the world to one in the top 20 is a great move. I'm going to give my best in training everyday."
Kansas City missed the playoffs last season after they finished sixth in the Eastern Conference and 13th overall in the 15-team league.
(Reporting by Sanjay Rajan; Editing by John O'Brien)