The deal clears nearly $2 million extra in salary-cap space for the Pistons to search for a free-agent big man.
The Nuggets, according to NBA front-office sources, will also receive $350,000 to apply to Sharpe's salary next season as a bonus to the acquisition of Afflalo, who played sparingly in Detroit over the past two seasons after the Pistons selected him No. 27 overall in the 2007 draft.
Among the top big men still available on the free-agent market are Boston Celtics restricted free agent Glen Davis and San Antonio Spurs unrestricted free agent Drew Gooden. The Pistons earlier expressed strong interest in Brandon Bass, who has signed with the Orlando Magic.
The draft pick to be conveyed to Detroit, sources say, will be Denver's second-round pick in 2011. But Portland owns the right to switch its second-round pick with the Nuggets that year as part of an earlier transaction. That means the Pistons will end up with the lower of Portland's or Denver's draft choice in 2011.
Afflalo averaged 4.9 points in 74 games last season. The former UCLA star scored a career-high 24 at Houston on March 18.
Sharpe played in eight games with the Pistons last season. He also appeared in four with Fort Wayne of the NBA Development League. The 6-foot-9 forward was taken by the Seattle Sonics in the second round of the 2008 draft, before being dealt to Detroit later that night.
"We are very pleased to add two young promising prospects like Arron and Walter to our veteran roster," said Mark Warkentien, the Nuggets' vice president of basketball operations. "Arron is a proven NBA defender with an incredible work ethic and Walter is a talented but raw player with tremendous upside."
Marc Stein is a senior NBA writer for ESPN.com. Information from The Associated Press was used in this report.