The Pistons placed the guard on waivers last month. Murray chose the Pacers over the Los Angeles Clippers.
"It was a tough decision," Murray said, according to the Indianapolis Star. "We were almost there [with the Clippers] then a call came from [Indiana] causing a change of plans real quick."
Murray signed with Indiana for the rest of the season. He'll back up point guard Travis Diener.
Murray, who signed as a free agent with the Pistons in July
2006, averaged 7.5 points, 1.9 rebounds and 3.4 assists in 19 games
this season, going into Sunday's game.
He made his debut with 7:54 left in Indiana's 128-106 win over Milwaukee on Sunday and scored four points.
The five-year pro has played in 309 NBA games with Detroit,
Milwaukee, Seattle and Cleveland.
The Pacers (24-36) are currently 2½ games out of the eighth and final playoff spot in the Eastern Conference.
Information from The Associated Press was used in this report.