The 23-year-old Redcar-born player, who started his career at Middlesbrough has played over 100 games for Cambridge and earlier loan spells with York City, Hartlepool United and Accrington Stanley.
Halliday, who rejected fresh terms at the Abbey Stadium, said: “I’m delighted to get it done early in the summer, I’m really looking forward to getting started.
“The main thing for me was getting the deal signed and being able to relax, with my contract coming to an end at Cambridge I felt it was time for a new challenge.
“I met Grant once the season had come to an end and once we’d had a chat it felt like the right decision to come here.”
Meanwhile, veteran defender Andy Butler, 35, has turned down a new 12-month deal with the club and has joined near-neighbours Scunthorpe United.