The 30-year-old had been training with the Bantams after leaving Malaysian Super League side T-Team earlier this year and impressed manager Phil Parkinson enough to earn a contract until December.
"Caleb is a powerful striker who will add a different option to our front line," Parkinson told the club's official website.
"He has been playing his football abroad for the last couple of years and he is now very keen to rebuild his reputation back in this country.
"He has looked great for us in training and we look forward to working with him on a more permanent basis now. We've been looking for someone to give us that little bit extra competition up front and Caleb gives us that."
Folan began his career at his hometown club Leeds United in 2001.