The 34-year-old became expendable after the Cardinals signed Felipe Lopez in late February. Lugo was acquired from Boston last July 22 in the trade that sent Chris Duncan -- son of Cardinals pitching coach Dave Duncan -- to the Red Sox.
Cardinals manager Tony La Russa said Lugo wouldn't have been happy as a part-time player.
"He acknowledged that he wanted to play a prominent role," La Russa said. "You try to avoid putting guys in a position that you don't think they'd do well in."
Baltimore will pay just the $400,000 minimum. At the time of last summer's trade, Boston agreed to pay $8.6 million of Lugo's $9 million salary this year.
The Orioles' infield is set with Brian Roberts at second, Cesar Izturis at shortstop and Miguel Tejada at third, but Roberts has been dealing with a nagging back problem and Lugo could find semi-regular playing time as the primary backup for all three.
"I'm going to have to see when he gets here and see what we're going to do, but he's got experience, has some energy. We'll look forward to fitting him in," Orioles manager Dave Trembley said.
Lugo hit .277 with two homers and 13 RBIs for the Cardinals last season and had a .286 average with one homer and three RBIs in 33 spring training at-bats. He was the starting shortstop on Boston's 2007 World Series championship team.
Joe Mather, Allen Craig and Nick Stavinoha, who had been competing for two Cardinals roster spots, all made the Opening Day roster. All three can play the outfield, and Craig and Mather can also play at least one corner infield spot.