The 29-year-old, who was linked with a number of Championship clubs, has penned a two-year contract at Ewood Park.
"Matt is a good signing for us," manager Gary Bowyer told the club's official website. "He will bring a lot of experience from playing in the Premier League and in the Championship.
"He's left-sided and has the ability to play in a couple of positions for us, both at centre-half and at left-back. We're delighted that he's agreed to join us and we look forward to working with him."
Kilgallon spent three years at the Stadium of Light.