Nuggets general manager Kiki Vandeweghe announced the signing Tuesday, refusing to release terms. The Rocky Mountain News reported the deal is worth $2 million.
"Jon is an experienced, tough-nosed veteran and is a great addition to our backcourt," Vandeweghe said.
In the past three weeks, the Nuggets also have signed free-agent guards Andre Miller and Earl Boykins.
"I like it so far," Vandeweghe said. "If you compare it to last year, we've put in an All-Star point guard compared to someone (Junior Harrington) who was undrafted."
Barry, who is 6-foot-5, averaged 6.9 points and 2.6 assists in 80 games for the Detroit Pistons last season.
"The last two stops that I've had have been rebuilding situations that have been turned around," Barry said. "That's something I take great pride in. I helped Sacramento get on the map and Detroit get back to some prominence. I hope to do the same here."
The 11-year veteran has appeared in 675 career games with Milwaukee, Golden State, Atlanta, the Los Angeles Lakers, Sacramento and Detroit, averaging 5.7 points and 2.1 assists per game. He has shot .390 from 3-point range for his career.
The Pistons did not make an effort to re-sign 34-year-old Barry this summer.
"That's the way this business is," he said. "It's not, 'What have you done for me lately?' It's, 'What can you do for me tomorrow?' Evidently, they didn't think I could help them tomorrow."
Barry, who has not missed a game because of injury in the past two seasons, has high expectations. He said that Miller will be the best point guard he has ever played with and that he expects Carmelo Anthony to be the NBA's rookie of the year.
He also endorsed a return to the fast-break offense that defined the Nuggets in the 1980s.
"I think that's the way basketball should be played," he said. "It's exciting to watch. We need to get people excited about our team."