Qualls' contract also includes performance and award bonuses, the team announced. He will wear No. 50 for the Phillies this season and give manager Charlie Manuel another setup option in front of closer Jonathan Papelbon.
The 33-year-old Qualls made a team-high 77 appearances for the San Diego Padres in 2011, posting a 6-8 record with a 3.51 ERA. He was particularly effective over his final 19 games where he held opposing hitters to a .219 batting average and had a 1.96 ERA.
Lidge last week signed a one-year contract with the Washington Nationals.
Qualls has not fared well through the years at Citizens Bank Park. In 13 career appearances at the Phillies' home park, he is 2-2 with an 11.12 ERA. He has allowed 21 hits and a whopping seven home runs in 11 1/3 innings pitched there.
Since 2005, Qualls has made more appearances (512) than any other pitcher and ranks second in relief wins (34), trailing only Jesse Crain (38).
Information from ESPN.com senior writer Jerry Crasnick and The Associated Press was used in this report.