The deal is contingent on Davis passing a physical exam.
Davis joins Randy Wolf as the second lefty free agent to sign with Milwaukee this offseason. He pitched previously for the Brewers from 2004 through 2006, posting records of 12-12, 11-11 and 11-11 in his three seasons with Milwaukee.
Davis will make a base salary of $4.25 million in 2010. The contract includes a $1 million buyout and an additional $1 million in incentives based on starts and innings pitched.
The deal includes a $6.5 million base salary for 2011. If Davis' mutual option is exercised and he reaches his incentives, the total value of the contract could reach $12.75 million.
Davis, 34, has a 90-97 career record in 11 big league seasons with Texas, Toronto, Milwaukee and Arizona. He led the National League with 103 walks last year, but has a track record for durability.
Since 2004, Davis has made 196 starts -- sixth most in the majors behind Derek Lowe, Barry Zito, Livan Hernandez, Mark Buehrle and Bronson Arroyo. That total includes several weeks that he missed to undergo cancer treatment in 2008.
MLB.com was first to report Davis' agreement with the Brewers.
Jerry Crasnick covers baseball for ESPN.com.