The deal, which is pending completion of a physical exam, could pay Duchscherer up to $4.5 million in salary and incentives, the source said.
The pitcher gets a guaranteed $700,000 in base salary and an additional $400,000 if he makes the 25-man roster. He also has an opportunity to earn $3.4 million more based on the number of starts he makes for the Orioles.
Duchscherer, 33, has a 33-25 record with a 3.13 ERA in eight seasons with Texas and Oakland. He made two All-Star teams with the A's -- one as a starter and one as a reliever -- but has pitched only 28 innings over the past two seasons because of injuries and a bout of clinical depression in 2009. Duchscherer underwent season-ending surgery on his left hip last June after making only five starts with Oakland.
The Washington Nationals, Seattle Mariners and Texas Rangers were among the other clubs to express an interest in Duchscherer, who is expected to pitch as a starter in Baltimore. Duchscherer slots in behind Jeremy Guthrie to give the Orioles another veteran presence in front of Brian Matusz, Jake Arrieta and Baltimore's stable of young starting pitchers.
Jerry Crasnick is a senior baseball writer for ESPN.com.