Jackson signed a one-year deal that could be worth up to $4.5 million, a league source told ESPN NFL Insider Adam Schefter.
Returning starter Ryan Fitzpatrick also will remain part of the team's future for now.
In announcing Jackson's signing on Friday, new coach Doug Marrone ended a month of speculation regarding Fitzpatrick's status. Marrone says he's informed Fitzpatrick and Jackson that he intends to have both compete for the starting job next season.
This was Marrone's most definitive statement regarding Fitzpatrick and his plans regarding the quarterback spot since the coach took over last month. Marrone replaced Chan Gailey, who was fired after three consecutive losing seasons.
Jackson never saw the field in spending all of last season as the Bills' third-stringer.
He's a seven-year NFL veteran who was acquired by the Bills in a trade with Seattle in August.
Information from The Associated Press was used in this report.