The signing of Allen means that the Boland Park-based franchise now have 16 pre-signed and retained players, with the likes of David Miller, Jos Buttler, Jason Roy, Lungi Ngidi and Tabraiz Shamsi making for a strong core of experienced international players.
Allen, who hails from Jamaica, joins fellow West Indian Obed McCoy at the Paarl Royals, having impressed with his impactful performances with the bat for Jamaica Tallawahs in the recently concluded season of the Caribbean Premier League (CPL).
Internationally, Allen made his T20I debut for the West Indies in 2018, and has since appeared in 34 matches, picking up 24 wickets at an economy of 7.43 while also boasting an impressive strike rate of 176.8 in the last five overs in the CPL.
Royals' director of cricket, Kumar Sangakkara, said: "Fabian is an all-round talent who offers us depth in both batting and bowling, and is a livewire in the field.
"He is someone who has played in a lot of T20 competitions around the world, and we are pleased to have him in the squad given the flexibility he brings to this team."
The Royals had previously also signed highly-rated 17-year-old South African fast bowler, Kwena Maphaka, as an uncapped player, who became the youngest-ever to be signed for a SA20 franchise.
Sunrisers Eastern Cape won the inaugural edition of the SA20 earlier this year with the second edition of the tournament set to start on 10 January 2024.