The 24-year old spent last season and half of the previous campaign with Walsall's opening day opponents Northampton Town, making a total of forty-two appearances before being named among a list of players to be released when their deals expired at the end of June.
Sale-born Shay, who is a product of Manchester City's academy, has enjoyed a varied career since turning professional in 2013, making appearances for clubs such as New York City, Rotherham United, Heerenveen and Northampton Town, and is keen to use that experience as he begins life as a Saddler.
Speaking via the club's official website, Shay said; "I’m really happy to be here. I’ve known for about a week I was coming to the club, so I’m happy to have got things over the line.
"My first meeting with Darrell was very positive. He seems like the type of manager who is very confident, not only in himself but in the bunch of lads he has got at the club, along with his staff.
"He told me to believe in myself and everything he said was positive. I have learned something new from every team I have been with during my career and I will be looking to bring those experiences here to Walsall.
"I just want to get off on the right foot, get acquainted with everyone in and around the club and make a really good first impression, on and off the pitch."