ESPNChicago.com's Bruce Levine had reported earlier Saturday that the deal was in place but that money was a concern for the Dodgers, who were reluctant to take on significant additional salary.
The Cubs are also sending $2.5 million to the Dodgers to cover part of the $4.25 million left on Lilly's contract this year.
"This is a tough concept to grab," Lilly told ESPNChicago.com. "It's not something I'm overly excited about. I'm going to miss a lot [in Chicago]. When I go over there and put a Dodger uniform on and meet my new teammates and go out and start competing with them, I'm sure I'll really enjoy it."
Lilly, 34, has just a 3-8 won-loss record -- but only because he has had the second-worst run support of any starting pitcher in the major leagues (3.77 runs per nine innings), ahead of only Roy Oswalt (3.07).
In his 17 starts, only three times have the Cubs scored more than two runs for him while he was in the game -- and they never scored more than three. He has failed to win 10 games in which he allowed three earned runs or fewer.
"Short of winning a World Series [in Chicago], I could not have asked for a better experience in my career," Lilly said. "I couldn't ask for a better place to play, teammates to play with, fans to play for -- all the way from the coaching staff to the front office. I can't say enough. The media as well. I'll never forget the times I've had here.
"I'm going to a real good place, and a team that aspires to winning the World Series. That's a fortunate thing to be part of."
Theriot is hitting .284, but with just a .320 on-base percentage and .327 slugging percentage. He has started 80 games for the Cubs -- 62 at second base and 28 at shortstop. He has slightly more than $800,000 of his $2.6 million salary coming over the rest of this season. He will become the Dodgers' every-day second baseman.
DeWitt is a natural third baseman who has been playing second for the Dodgers. He is hitting .270, with a .352 on-base percentage and .371 slugging percentage.
Jayson Stark is a senior writer for ESPN.com.