The deal has a base value of $5.5 million and a maximum value of $6 million, a source confirmed to ESPN. Ivory, who turns 30 on March 22, will be guaranteed $3.25 million. NFL Network first reported his compensation.
Ivory projects to be the Bills' No. 2 running back behind LeSean McCoy, whose 287 carries last season were the third most of his nine-year career. McCoy accounted for 59 percent of Buffalo's total rushing attempts last season, significantly more than his first two seasons with the Bills.
General manager Brandon Beane believed the Bills needed to find a complementary running back to McCoy this offseason. Mike Tolbert averaged 3.7 yards per carry in that role for Buffalo in 2017 and saw his playing time decrease later in the season in favor of Travaris Cadet. Both Tolbert and Cadet will become free agents this month.
Ivory was cut Feb. 23 after two seasons with the Jacksonville Jaguars in which he rushed for 821 yards and four touchdowns in 25 games. He also caught 41 passes and had a receiving score.
Ivory's playing time with the Jags diminished greatly after the team selected Leonard Fournette with the fourth overall pick in the 2017 draft. Ivory did not play in the final two games of the 2017 season, and he only saw action in one of the team's three playoff games.
By cutting Ivory, the Jaguars saved $3.5 million against the salary cap. He had signed a five-year, $32 million deal -- with $10 million guaranteed -- with Jacksonville after leading the AFC in rushing while with the New York Jets in 2015.
Ivory set career highs in 2015 for carries (247), rushing yards (1,070) and rushing TDs (7). He also caught a career-high 30 passes that season, showing he could contribute in the passing game, and played in the Pro Bowl as a replacement player.
He entered the NFL as an undrafted free agent out of Tiffin University in 2010 with the New Orleans Saints, where he spent most of his three seasons on the bench before being traded to the Jets during the 2013 NFL draft.
ESPN's Mike Rodak and Michael DiRocco contributed to this report.