Owls boss Chris Turner was given room to move for Powell following the exit from Hillsbrough of striker Gerald Sibon to Dutch side Heerenveen.
Turner is looking to use the £400,000 saved in Sibon's wages to make further additions to an Owls' squad which has won three of its last four Division One matches to move off the bottom of the table.
The Owls' boss said: "Darryl is a very enthusiastic and committed footballer.
"He has vital experience and many good years in front of him.