Dailly has not played for West Ham for nearly a year

The 34-year-old has fallen out of favour at Upton Park and spent two months on loan at Championship club Southampton earlier this season.

Rangers have taken over the Scotland international's contract, in a similar move to the deal done with Everton 12 months ago for David Weir.

Boss Walter Smith had only last week ruled out a loan move for Dailly.

"It was just one of those things I had an idea about," Smith had told BBC Scotland.

"But we've got no business at the present moment. Unless something crops up that we feel will be of benefit to our squad, we'll go with what we have."

The versatile defender, who has won 66 caps for Scotland, effectively replaces Ugo Ehiogu who moved to Sheffield United earlier this month.

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Dailly began his career with Dundee United and had stints at Derby County and Blackburn Rovers before moving to West Ham in 2001.

He made 155 appearances for the Hammers but found opportunities limited since Alan Curbishley replaced Alan Pardew as manager, with his last appearance coming in the 4-0 defeat to Charlton last February.

Smith will be familiar with the defender, who can also be deployed as a holding midfielder, from his days in charge of the Scotland national team.

Dailly was included in George Burley's first Scotland squad for a three-day training camp in Loch Lomond, starting on Sunday.