Allen tells ESPN's Josina Anderson that the deal is for two years and the total value of the contract is $7 million, according to Allen's agent, Drew Rosenhaus.
Allen becomes the most experienced and accomplished tight end on the Dolphins roster. He will likely compete with 2018 second-round pick Mike Gesicki for Miami's starting tight end job.
He joins the Dolphins after being released by the New England Patriots on Monday in a move that freed up $7.3 million on their salary cap.
The 29-year-old Allen had reduced his 2018 base salary to $3 million in the 2018 offseason to remain with the Patriots. He had a scheduled base salary of $6.4 million for the 2019 season.
The Patriots acquired Allen before the 2017 season in a trade with the Indianapolis Colts. He appeared in 29 games in two seasons with the team, catching 13 passes for 113 yards and a touchdown.
Allen was more involved in the passing game with the Colts, catching 126 passes for 1,451 yards and 19 touchdowns in five seasons after Indianapolis selected him in the third round (64th overall) of the 2012 draft.
He took free-agent visits with three other teams before deciding to sign in Miami.
ESPN's Cameron Wolfe and The Associated Press contributed to this report.