The deal carries an $800,000 base salary, and Kennedy will receive an additional $25,000 for each of 325, 350, 375, 400, 425 and 450 plate appearances, meaning he could stand to earn as much as $950,000.
Kennedy, who will turn 36 in January, will serve primarily in a utility role and has the ability to play first, second and third.
"Adam gives us infield depth and an experienced left-handed bat," Dodgers general manager Ned Colletti said in a statement issued by the club. "He provides us with infield versatility at second and third base and can play first as well."
Kennedy doesn't play shortstop, however, meaning the Dodgers still could be in the market for someone to back up Dee Gordon. But Juan Uribe, who for now is penciled in as the primary third baseman, could move to short on days when manager Don Mattingly wants to rest Gordon, with Kennedy presumably taking over at third.
Justin Sellers, who made his major league debut by appearing in 36 games for the Dodgers in 2010, likely will be the team's other utility infielder if the Dodgers don't add one from outside the organization.
Kennedy is entering his 14th major league season, seven of which he spent with the Anaheim/Los Angeles Angels, whom he helped to a World Series title in 2002.
He is a career .272 hitter with a .326 on-base percentage. He has little power, never hitting more than 13 home runs in a season. In 2011 with the Seattle Mariners, Kennedy hit .234 with 23 doubles, seven homers, 38 RBIs and a .277 OBP.
Kennedy grew up in Riverside and attended Cal State Northridge. He is a former first-round draft pick of the St. Louis Cardinals (1997).
Tony Jackson covers the Dodgers for ESPNLosAngeles.com.