Fulham were believed to lead the race for the right-back entering transfer deadline day, with Brighton and Southampton seemingly losing out despite showing a firm interest over the last 24 hours.
However, Brighton have now confirmed a deal for the 27-year-old, who has signed a contract until the summer of 2022.
"Martin's pedigree is excellent, and I'm delighted we have been able to add a player of his standing to our squad. There is no doubt he will improve our options in the right-back position," Brighton boss Chris Hughton told the club's official website.
"He's won several domestic and European honours in Spain, and played the majority of his career in the top level of La Liga. He has a wealth of experience, at 27 years old he is a very good age, and I'm now looking forward to working with him."
Montoya came through the youth system at Barcelona and made 67 first-team appearances for the Spanish giants before joining Valencia in the summer of 2016.
Last term, the former Spain Under-23 international made 31 appearances for Los Che in all competitions.