Mavericks owner Mark Cuban said in an email Saturday that Ellis has agreed to a three-year deal worth at least $25 million, according to sources close to the process.
The deal with Ellis was reached after first-round pick Shane Larkin broke his right ankle in summer league practice Friday. Dallas also is backing out of a three-year, $9 million deal with Devin Harris because of a toe injury, sources close to the situation said.
Ellis figures to start alongside point guard Jose Calderon, another free agent who signed a four-year, $29 million deal.
The 27-year-old Ellis averaged 19.2 points with Milwaukee last season but had the lowest 3-point shooting percentage among eligible players at 28.7 percent. Calderon had the highest at 46.1 percent.
Ellis began his career with Golden State and was on the team that shocked the 67-win Mavericks in the first round of the 2007 playoffs. He started five of the six games against Dallas but came off the bench in all five games of a second-round loss to Utah.
Ellis didn't return to the playoffs until last season with the Bucks, who were swept by Miami in the first round. The Warriors traded him to Milwaukee late in the 2011-12 season, and he declined an $11 million option to return to the Bucks.
The Mavericks still have a glaring need at center after Dwight Howard chose Houston and Andrew Bynum went to Cleveland. Dallas figures to sign a center from a dwindling list of alternatives topped by Samuel Dalembert.
Even without Larkin and Harris, who started his career in Dallas as a No. 5 pick nine years ago, the Mavericks will open camp with at least five newcomers at guard after deciding they weren't happy with the one-year experiment of Darren Collison and O.J. Mayo last season.
The Mavericks added another free agent in Gal Mekel, the second Israeli-born player in the NBA. He played professionally in his home country after a two-season stint at Wichita State that ended in 2008.
Dallas took two guards in last month's draft. The Mavericks traded down twice and ended up with Larkin, the son of Hall of Fame shortstop Barry Larkin, at No. 18. In another trade for the 43rd pick, they got Ricky Ledo, who sat out his only season at Providence for academic reasons.
Information from ESPN.com's Marc Stein and The Associated Press was used in this report.