Taylor, an 11-year veteran, was released by Jacksonville last week for salary cap reasons, after playing his entire career with the Jaguars. The 33-year-old was scheduled to earn a base salary of $6 million in 2009 and was also due a $1 million bonus in coming weeks.
Taylor agreed to a two-year, $5 million contract that pays him $3 million in 2009 and $2 million next season.
"I have tremendous respect for Fred Taylor, both as a person and as a player whose production is outstanding," Patriots coach Bill Belichick. "I look forward to working with Fred as he joins the rest of our running back group."
The addition of Taylor provides the Patriots a veteran back who could battle fourth-year veteran Laurence Maroney for the starting job. It also continues the Patriots' recent tradition of adding veteran backs to bolster their depth chart.
Last season, New England signed veteran LaMont Jordan as a free agent, and before that it was Corey Dillon , who gave the Patriots experience in production at running back before his release. The New England roster also features much-traveled veteran Sammy Morris, who has been effective for the Patriots as a role player.
Maroney, the team's first-round choice in the 2006 draft, has been anything but durable in his brief career, suffering through a series of injuries that have limited him to 30 games and 15 starts in three years. Taylor, however, has also been hampered by injuries over his career.
The 16th-leading rusher in NFL history with 11,271 yards and 60 touchdowns, Taylor visited on Wednesday with Buffalo Bills officials. At the time, there were strong indications Taylor would sign with the Patriots' AFC East rival. But the Patriots persuaded Taylor to leave Buffalo without a contract, and coach Bill Belichik's sales pitch proved effective.
Taylor, Jacksonville's first round pick in 1998, was a productive back for the Jaguars during his 11-year tenure. The former Florida star appeared in 140 games and was one of the most popular players in the community.
By releasing him, Jacksonville officials seemed to elevate Maurice Jones-Drew to their No. 1 running back and are currently negotiating a long-term contract with him.
Len Pasquarelli is a senior NFL writer for ESPN.com. ESPN.com's John Clayton contributed to this report.