The 33-year-old has signed a one-year contract.
Lillyman made his NRL debut playing for the North Queensland Cowboys, against the Knights, in 2003. He played 62 NRL games before linking with the New Zealand Warriors in 2009, where he made a further 189 NRL appearances.
In addition, Lillyman has played 14 Origin matches for Queensland.
“Newcastle is a good young team on the up and I’m really looking forward to getting over there and getting stuck in,” said Lillyman.
“I think the Knights have got some great young players, especially in the forwards, and I am keen to help them in their development.
“Newcastle is a very proud rugby league region and town and I can’t wait to experience that first hand.”
General Manager Football Darren Mooney said Lillyman's experience will be a great asset to the Club.
“Jacob has plenty of experience and he will not only be a great contributor, but will provide wonderful leadership for our young squad,” Mooney said.
Lillyman will commence pre-season training with the Club in November.