Erstad will receive a base salary of $750,000, and the White Sox have a $3.5 million option for 2008 with a $250,000 buyout.
A two-time All-Star with the Los Angeles Angels, Erstad had arthroscopic surgery for a bone spur in his right ankle on Oct. 5 after batting .221 with no home runs and five RBIs in a career-low 40 games last season. He is the only player to win the Gold Glove as an infielder (2004, at first base) and outfielder (2000 and 2002).
"I'm excited about joining the White Sox," Erstad said in a statement. "This is a new opportunity and challenge for me. I've heard this is a great group of guys, and this is a team with a good chance to win it all."
The 32-year-old is a career .286 hitter with 279 doubles, 114 home runs, 625 RBIs and 818 runs scored in 11 seasons -- all with the Angels.
Erstad's best season was in 2000, when he hit .355 with 39 doubles, 25 home runs, 100 RBIs, 121 runs scored and 28 stolen bases and finished eighth in the AL Most Valuable Player voting. He was the first major-leaguer to drive in 100 runs as a leadoff hitter. His 240 hits that season are tied for both the 13th-highest total all-time and third-highest since 1931.
Erstad has a .339 average, three homers and 12 RBIs in 29 postseason games.
His option price for 2008 could increase in increments up to $6 million if he has 600 plate appearances this year, with the buyout rising to $1.25 million. The option price would rise by $250,000 if he is an All-Star this year.