The team announced the move Tuesday night.
Faneca, released by the New York Jets last weekend, will receive a $300,000 signing bonus and $100,000 workout bonus, the source told Schefter. The $2.5 million base salary is fully guaranteed. He's also set to earn $5.25 million and a $118,000 workout bonus from the Jets. His total compensation is nearly $8 million for the season.
Faneca is reunited with Russ Grimm, the Cardinals' assistant head coach and offensive line coach. Grimm coached Faneca with the Pittsburgh Steelers after Faneca was drafted in 1998. He won one Super Bowl ring with the Steelers in 10 seasons with the team. He spent the last two years with the Jets.
Former Steelers offensive coordinator Ken Whisenhunt is the Cardinals' head coach.
"It's a great situation for me with a group of coaches I'm familiar with, especially to be back with Russ again," Faneca said in an e-mail to The Associated Press.
"We're obviously familiar with him from our time together in Pittsburgh, but we've also seen a lot of tape of him from the last two years with the Jets," Whisenhunt said, "and he's still the same tough, physical player who does a good job pulling and getting to the next level."
Faneca is a nine-time Pro Bowl selection who's played in 190 career NFL games, including the last 128 in a row over the past eight years.
"There's a reason he's been selected to the last nine Pro Bowls," Whisenhunt said. "And at a time when we're facing changes on our offensive line, we're very fortunate to have a player of his caliber coming on board."
The Cardinals already have a left guard in Reggie Wells, but it's possible either Wells or Faneca could switch to the right side. Deuce Lutui, the starter at right guard the past two seasons, is a restricted free agent who has yet to sign his qualifying offer.
Faneca, pursued by the Cardinals as a free agent two years ago, will be part of a line that already had been altered with the planned switch of Levi Brown from right to left tackle. Incumbent left tackle Mike Gandy is an unrestricted free agent and was not re-signed.
"My family and I have had a wonderful time and experience here with the Jets," Faneca told the AP. "We look forward to what lies ahead, on and off the field."
Faneca's age and slip in production, particularly in pass protection, were also likely factors in him being cut.
"With Alan, we just felt it was time to move on," Jets general manager Mike Tannenbaum said Saturday.
Faneca signed a five-year, $40 million contract, with $21 million in guarantees, with the Jets in 2008 -- making him the highest-paid offensive lineman in NFL history at that time. He helped with the development of center Nick Mangold and left tackle D'Brickashaw Ferguson, who both made the Pro Bowl last season.
Information from ESPN NFL Insider Adam Schefter and The Associated Press is included in this report.