It's a one-year deal worth $3.5 million that could go to $6.5 million with playtime incentives, a source told ESPN's Adam Schefter.
The Seahawks released Shead on March 12, keeping their word to the cornerback that he would be an unrestricted free agent.
Despite releasing Shead, the Seahawks still had hoped to re-sign him.
Shead's free-agent status had been in question after he spent all but two games of this past season on the physically unable to perform list while working his way back from a torn ACL in his left knee. Per the NFL's collective bargaining agreement, that would technically require Shead's contract to toll, or to roll over to 2018 on the same terms.
The tolling rule applies to players who, in the final season of their contract, remain on the PUP list as of their team's sixth regular-season game. As in Shead's case, that includes players on one-year deals. A restricted free agent last offseason, Shead signed a one-year deal worth $1.2 million. So if his contract were to toll, he would be signed for 2018 at the same amount.
Shead, who will turn 29 in June, started for a season and a half opposite Richard Sherman at right cornerback before he tore his ACL in a playoff game in January 2017. He has experience at all five positions in Seattle's secondary since the team signed him as an undrafted free agent in 2012. That includes one start at strong safety in 2015 while Kam Chancellor was holding out.
With Chancellor's football future in jeopardy because of a career-threatening neck injury, the Seahawks had approached Shead about possibly playing strong safety next season.
ESPN's Brady Henderson contributed to this report.