The 24-year-old arrives at Easter Road after clocking up over 150 appearances for the Doonhamers during his five seasons at Palmerston Park.
“I’m delighted about the move and really excited about the future here with Hibernian,” Carmichael told Hibs’ website.
“I enjoyed some memorable experiences at Queen of the South and now I can’t wait to start the next chapter of my career at Hibernian.
“I’m looking forward to joining up with the squad for the start of pre-season and working with the manager.
“The fact he wanted to add me to the squad here is really pleasing and now I want to play my part in helping the club to achieve promotion.”
Hibs head coach Alan Stubbs believes winger Carmichael will add to his team’s firepower.
“We’re delighted to be able to sign Dan, he gives us more attacking options and adds pace to the team in a number of positions,” said Stubbs.
“Every time I’ve seen him play I’ve been impressed by him. He is an exciting winger, direct, quick and clever.
“We’ve been busy over the last couple of days and the deals we’ve concluded are a statement of intent. We want to hit the ground running next season.”
On Monday Hibs signed former Hearts striker James Keatings while midfielder Fraser Fyvie extended his contract at Easter Road.