Swapping the cobbles for Albert Square, viewers will see Timothy arrive in Walford in January after Danny's character, Mick Carter, joins the show at Christmas.
The star, who is married to Fawlty Towers actress Prunella Scales, will play retired Billingsgate fishmonger Stan Carter who is described as "opinionated" and "curmudgeonly".
A spokeswoman for the show said: "Stan is no fluffy old man in a cardigan and it won't be long before he starts manipulating the whole Carter clan from the comfort of his armchair."
Timothy, who played Eric Babbage in Coronation Street in February, said he was "excited" to be taking on the role, adding: "Stan is a wonderful character and I look forward to seeing what is going to happen to him."
He will be joined by Annette Badland who will play the family's "bustling busybody" Aunt Babe.
Executive producer Dominic Treadwell-Collins said: "We are reinvigorating EastEnders' older generation with the arrival of Stan and Aunt Babe, who will start to fill in some holes in the dark Carter family history.
"Tim and Annette are national institutions and such gifted, nuanced actors, bringing a real touch of Dickensian magic to the screen. It's an honour to have them join our company."