The actor-turned politician said a $900,000 donation by Playboy founder Hugh Hefner and a $500,000 matching grant capped a $12.5 million fundraising drive to protect 138 acres (56 hectares) near the famous sign from the development of luxury estates.
Schwarzenegger called it "the Hollywood ending we hoped for."
"It's a symbol of dreams and opportunity," he said. "The Hollywood sign will welcome dreamers, artists and Austrian bodybuilders for generations to come."
The governor praised the public and private partnership that raised the money to keep the property out of the hands of developers.
The Trust for Public Land conservation group raised $6.7 million in private funds, the state offered $3.1 million, and local funds totaled $2.7 million.
Hefner, who calls the sign "Hollywood's Eiffel Tower," put the effort over the top.
"My childhood dreams and fantasies came from the movies, and the images created in Hollywood had a major influence on my life and Playboy," Hefner said.
Schwarzenegger said private donations came from all 50 states, 10 foreign countries and a number of individuals, including J. Paul Getty heir Aileen Getty, Steven Spielberg and Tom Hanks.
The hilltop property known as Cahuenga Peak features a 360-degree panorama of Los Angeles and the San Fernando Valley.
It was originally purchased in 1940 by Howard Hughes, who wanted to build a home for his then-girlfriend Ginger Rogers.
But the relationship ended, and the Hughes estate sold the property in 2002 for $1.7 million to the Chicago-based investment group Fox River Financial Resources Inc.
It was put on the market again two years ago for $22 million, but the Trust for Public Land negotiated a lower price.
Wildlife Conservation Board executive director John Donnelly said the permanent protection of Cahuenga Peak is a significant addition to the city's Griffith Park and will enhance wildlife corridors throughout the region.