Donnelly had Tommy John surgery last August, so the Indians are taking a flyer on him in the hope he can provide some late-season bullpen help.
Donnelly spent last season with the Boston Red Sox, going 2-1 with a 3.05 ERA in 27 appearances for the World Series champions.
He went on the 15-day disabled list in June with a forearm injury and underwent Tommy John elbow surgery in August. Although he can't help them immediately, the Indians are hoping the right-hander may be able to bolster the back end of their bullpen at some point.
He is expected to report to camp in late March and will miss the first few months of the season as he rehabs from the operation.
Donnelly's contract is complex because of uncertainty over his future. His major league salary, if he makes it back to the big leagues, would be paid at the rate of $750,000 a year. But he can also earn another $25,000 for each 10 days he spends in the major leagues through the first 50 days. He could then earn $50,000 for each of the next 10 days he spends in the big leagues, through the first 90 days. If he isn't on the Indians' 25-man big-league roster by Aug. 6, he can request his release.
The 36-year-old, who was an All-Star with the Los Angeles Angels in 2003, was one of 80-plus players named in December's Mitchell Report on doping in baseball. The Red Sox did not tender a contract for Donnelly hours before he was named in the report.
The Mitchell Report said Kirk Radomski, a former clubhouse attendant for the New York Mets, got a phone call from Donnelly in 2004 seeking Anavar, an anabolic steroid. According to the report, Radomski made one sale of Deca-Durabolin for which Donnelly paid $250 to $300.
The report also said that while deciding whether to trade for Donnelly, Boston's baseball operations department discussed concerns that he was using performance-enhancing substances.
In an e-mail to vice president of player personnel Ben Cherington, Zack Scott of the Red Sox staff wrote of Donnelly: "He was a juice guy but his velocity hasn't changed a lot over the years. ... If he was a juice guy, he could be a breakdown candidate."
In a statement to ESPN.com, Donnelly said he discussed Anavar in
a phone call with Radomski in 2004 when he had several physical
problems. He said he learned it was a steroid and "realized that
was not an option." He said he never took Deca or Anavar and never
purchased or received anything from Radomski.
Donnelly has a major league record of 25-9 with four saves and a 2.88 ERA in 303 relief appearances. He began his career in 1992 in the Chicago White Sox organization and has also been with the Chicago Cubs, Cincinnati Reds, Tampa Bay Rays, Toronto Blue Jays and Pittsburgh Pirates.
He also had a stint with an independent league team before joining the Angels in 2001.
Meanwhile, the Rays signed Eric Hinske to a minor-league deal. He'd earn $800,000 if he makes the team.
Senior writer Jayson Stark covers Major League Baseball for ESPN.com. Information from The Associated Press was used in this report.