The former All-Star is signing a two-year, $3.2 million deal with the Spurs with a player option for Year 2, agent Mark Bartelstein told ESPN on Thursday.
"We've been talking to the Spurs for quite a while," Bartelstein said. "There's a number of places he could have gone and done better economically, but Pop and R.C. (coach Gregg Popovich and general manager R.C. Buford) worked hard to let David know how valuable they thought he could be to their team."
Lee, 33, proved he still could be a significant contributor during his two-month stint with the Dallas Mavericks after receiving a buyout from the Boston Celtics. He averaged 8.5 points and 7.0 rebounds in 17.3 minutes per game for the Mavs, primarily playing as a small-ball center off the bench.
Lee, a two-time All-Star with career averages of 14.2 points and 9.2 rebounds per game, had fallen out of the rotations with the Golden State Warriors and Celtics before finding a fit in Dallas.
After serving as one of Golden State's top offensive threats in his first four seasons there, Lee suffered a significant hamstring injury during the 2014 preseason, which sidelined him for most of the first two months and opened the door for Draymond Green to seize the starting job at power forward. Upon his return, Lee accepted a significantly reduced role and helped the Warriors win the title, making particularly key contributions during Game 4 of the NBA Finals.
The Warriors and Lee agreed to seek a trade for him after that title run due to his high salary and reduced role. He was sent to Boston in a summer salary-dump deal and has acknowledged that he spent his stint with the Celtics getting in shape after celebrating the Warriors' title run well into the offseason.
ESPN's Tim MacMahon contributed to this report.