Schumaker gets a $2 million base salary next season and $2.5 million in 2015. The deal includes a club option for 2016 with a $2.5 million base and a $500,000 buyout.
The 33-year-old Schumaker was drafted by current Reds general manager Walt Jocketty and played his first eight seasons in St. Louis, batting .288 with 23 homers and 211 runs batted in. He played for the Dodgers last season, batting .263 in 125 games with two homers and 30 RBIs.
He played second base and all three outfield positions last season.
"I'm not going to assume anything other than that I'll be off the bench, the role I've been in the last couple of years in the major leagues," Schumaker said during a conference call. "I don't think it will be that much different -- being used off the bench more than anything."
To open a spot on the 40-man roster, the Reds designated outfielder Derrick Robinson for assignment. Robinson split time between Triple-A Louisville and Cincinnati last season, batting .255 in 102 games for the Reds.
Schumaker was interested in staying with the Dodgers, but got the impression he wasn't a priority during contract talks. When the Reds showed an interest, he quickly decided to take the offer rather than go deep into the offseason as a free agent.
"I had a great time in LA and especially with the run we had to get to the playoffs, the whole deal of how we started, how we finished -- a pretty amazing run," he said. "I felt there was some unfinished business and maybe going back there.
"During negotiations, I kind of felt like maybe I was on the backburner, maybe hold on and sit and wait and see how things developed and what was going on in their organization. And I really didn't want to wait. I felt so good about Cincinnati."
The Reds have won 90 games and made the playoffs in three of the last four seasons, but failed to make it past the first round. They fired manager Dusty Baker after they lost the one-game wild card playoff in Pittsburgh. Schumaker said the Reds' recent success was a major factor in his decision.
"The first thing I wanted to do was sign with a team that has a chance to win," he said. "The Reds have been that way, one of the best teams in the National League the last three or four years. I knew that division really well. Walt Jocketty drafted me and gave me the opportunity to play professional baseball."