Woodson's deal is worth a maximum of $4.3 million and includes a $700,000 signing bonus, ESPN's Josina Anderson reported.
The move will be popular with Raiders fans, many of whom staked out the team's facility Tuesday to greet Woodson on his visit and urge him to sign with Oakland.
They got their wish a few hours after he arrived when the team announced the deal.
Woodson, the fourth overall pick in the 1998 draft by Oakland, returns to a vastly different franchise than the one he left following his eighth season with the team in 2005. Owner Al Davis died in October 2011 and the team is now run by Davis' son, Mark. Kicker Sebastian Janikowski is the only player left from Woodson's eight years in Oakland that included three consecutive AFC West titles and a trip to the Super Bowl following the 2002 season.
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