Ferguson’s seven-year association with Newcastle United came to an end this week after the League One club had an undisclosed fee accepted.
The versatile 24-year-old – who can play on the wing and at full-back – had been on loan at The Den.
“It’s a relief to get the deal done,” said the Northern Ireland international.
“I’ve been keen to get everything sorted, and I’m now really looking forward to my future with Millwall.
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“I’ve loved every second of my time here, so it was a no-brainer to sign on a permanent basis.
“My task now is to help Millwall get back where we belong, which hopefully can be done this season.”
Millwall managaer Neil Harris said: “Shane has displayed his ability in two different positions for us since he joined on loan, so naturally I’m delighted that he is now with us on a permanent basis.”