The Pacers will pay Bynum $1 million for the remainder of the season, a source told ESPN.
Bynum, who will join the Pacers next week, will back up All-Star Roy Hibbert along with Ian Mahinmi. Also featuring power forwards David West and Luis Scola, the Pacers will have some of the best depth in the NBA at the big man positions.
The move also kept Bynum away from the rival Miami Heat, who beat the Pacers in seven games in last season's Eastern Conference finals. The Pacers enter Saturday with a three-game lead over the Heat for the East's best record.
"We are obviously happy to have him join our team," Pacers president of basketball operations Larry Bird said in a release. "He gives us added size, he is a skilled big man and he has championship experience. With the minutes he gets, he should be a valuable addition."
Five teams were interested in Bynum, including the Heat, but it was the Pacers who had a roster spot and the space under the luxury tax to add him now.
"It really wasn't a hard decision, I think it's the right fit for me," Bynum said in a statement. "In all honesty, I think we've got the best chance of winning. It will be great to back up Roy, and I'll do whatever I can to help this team."
The Heat could have outbid the Pacers for Bynum because they had all of their mid-level exception of $3 million to spend. However, the Heat currently have a full roster of 15 players and a luxury-tax bill of $15 million, meaning creating room for and signing Bynum would have been expensive. Plus, the Heat are getting encouraging play from Greg Oden, who recently returned after missing four years due to injuries.
If the Heat do make another addition this season, it will likely be for a wing player who specializes in defense, sources told ESPN. The team has been in trade talks recently looking to trade for a wing or to open up a roster spot to sign one in free agency.
Bynum, who missed all of last season with a knee injury, averaged 8.4 points and 5.3 rebounds in 24 games for the Cleveland Cavaliers this season. The Cavs traded him to the Chicago Bulls with two future draft picks for Luol Deng on Jan. 7. The Bulls, in a salary-saving move, released Bynum the next day before the second half of his $12 million contract became guaranteed.