"I am proud to announce that I joined Ismaili after a meeting with the board of directors," Shadi told FilGoal.com.
The former Ahli and Ittihad captain said that Egypt and Ismaili keeper Essam Al-Hadari played a pivotal role in sealing the move.
"I also want to thank Al-Hadari for his efforts so that I can play alongside him in Ismaili," added Shadi.
Shadi had joined Ittihad from Ahli last season on a one-year deal and failed to reach an agreement for an extension.
Ismaili were looking for a replacement to international defender Moatassem Salem , who is set to join either Ahli or Zamalek.
The 33-year-old defender can play both as a center-back or right-back and has won four African Champions League titles with Ahli.
He was also a member of the Egyptian team who won the African Cup of Nations in 2008.