The contract is worth $2 million, a source close to the situation told ESPNChicago.com's Roman Modrowski.
The 6-foot-1 guard, known for his outside shooting, was also with Chicago from 2003-06. Pargo played in Russia and Greece last season. He is a six-year NBA veteran, having also spent time with the Lakers, Raptors and Hornets.
He has averaged 6.9 points in 316 regular-season games, while shooting 36.5 percent from the 3-point line. In 33 playoff games, his average is 6.5 points and 36.8 percent on 3-pointers.
Pargo gives the Bulls backcourt depth after they lost leading scorer Ben Gordon to Detroit.
Information from The Associated Press was used in this report.