Letheren most recently spent time with League One side Morecambe having signed from Chesterfield last summer.
The 34-year-old left the Globe Arena earlier this year and had been linked with a move to Aberdeen.
But Letheren, who has represented a number of clubs throughout his career such as; Salford City, Plymouth Argyle, Blackpool, Doncaster Rovers and Barnsley, becomes Paul Hartley’s first signing as Pools boss.
Hartley is familiar with Letheren from their time together at Dundee and the Pools boss brings in the Welshman as a player-coach this season.
Hartley has suggested he is keen to develop his backroom staff after the exits of Michael Nelson and Dimitrios Konstantopoulos recently and Letheren will act as a goalkeeping coach as well as being able to provide competition for Ben Killip next season.
“I am delighted to join the club. I know the manager really well and we enjoyed a successful spell back at Dundee,” Letheren told the club website.
“I am looking forward to supporting the goalkeeping team and helping the team the best I can.”
Pools boss Hartley commented on his first signing by saying: “[We’re] delighted to bring Kyle to the club. He is someone I know well from my time at Dundee.
“He’s a good goalkeeper with good experience and I know he’s going to work well with Ben and the rest of the group.
“He has the qualities and attributes to be a great goalkeeping coach and I know how excited he is to get started.”