The 25-year-old midfielder, who represented his country at the 2014 FIFA World Cup and the 2015 and 2017 Africa Cup of Nations, has previously played in the Premier League for Tottenham Hotspur.
He made 66 appearances for the North London club - scoring his only goal against Newcastle in a League Cup tie in December 2014 - before moving to Schalke, initially on loan, in August 2016.
Bentaleb has made 97 appearances for the Bundesliga side, scoring 19 times, and has played in the Champions League for Die Königsblauen.
He told nufc.co.uk: "I'm very happy to come back to the Premier League, especially with a club such as Newcastle.
"The project really interested me. I wanted absolutely to come back to the Premier League. The coach had some trust in me and the club also - I saw that straight away - and I think it's the perfect move for me."
Newcastle United head coach Steve Bruce said: "He's somebody who I paid particular attention to when he was at Spurs, when he broke through and got a big money move to Germany.
"He's played at the highest level now for the last four or five years but he will come in hungry and feeling he has something to prove and will give us the competition we obviously need.
"With the numbers that we've got at the minute, he's got a bit of experience and I think people will enjoy watching him play. He'll come into the squad and I'm sure he'll be a good acquisition for us.
"The fact that he's played in the Premier League before helps, because we know that he can play and knows what the demands of the Premier League are. He's gone from the Premier League to Schalke and played in the Champions League as well, so we're delighted to get him. It's a great signing."