The Panthers will pay $7 million to Bridgewater; the Broncos will pay him $3 million, a source told ESPN's Adam Schefter.
"Acquiring Teddy Bridgewater adds competition, experience and a strong veteran presence to our quarterback room," Broncos general manager George Paton said in a statement. "He's a talented player and leader who's had success in this league in a number of different situations."
The trade will not take the Broncos, who have the No. 9 overall pick, out of the market for a quarterback in Thursday's draft, a source told ESPN.
Paton saw several of the top prospects in person at each of their pro days in recent weeks, and the Broncos had representatives at the second pro days for North Dakota State's Trey Lance and Ohio State's Justin Fields.
Broncos quarterback Drew Lock had his best game of the 2020 season in a 32-27 win over the Panthers on Dec. 13 in Bank of America Stadium, completing 21 of 27 passes for 280 yards and four touchdowns without an interception.
Paton, who was hired in January, has consistently said the team likes Lock's potential, and he has praised the quarterback's work this offseason. Lock, who is 8-10 in two seasons as starter, tied for the league lead with 15 interceptions in 13 starts for the Broncos last season, and his passing rating ranked 32nd.
"We're still going to look at the quarterback position," Paton said during his pre-draft news conference last week. "I've said since I've gotten here that we want to bring in competition. That's the goal, and we plan on doing that.''
Since 2015, the Broncos have the worst Total QBR (45.2) in the NFL, according to ESPN Stats & Information. Denver hasn't been to the playoffs since winning Super Bowl 50.
Bridgewater, who signed a three-year, $63 million deal with the Panthers before last season, threw for 3,733 yards in 2020, with 15 touchdowns and 11 interceptions. By renegotiating the final two years of Bridgewater's deal, the Panthers will save $6 million in 2021 and $26 million in 2022, a source told ESPN's David Newton.
The financial concessions by the Panthers for the 2021 season were key to the deal. The Broncos largely sat out the quarterback derby during free agency, with Paton saying he didn't want to "force it and bring a guy in or overpay a guy to come in and he's not as good as the guy we have and maybe he's not good enough to compete.''
Paton, the former assistant GM in Minnesota, has familiarity with Bridgewater. The Vikings moved back into the first round in 2014 to take Bridgewater with the 32nd overall pick. Bridgewater was 17-11 in Minnesota, leading the Vikings to a division title in 2015 with an 11-5 record.
"Being familiar with Teddy from Minnesota, he's going to compete and do everything he can to help us win," Paton said.
The sixth-round pick going to the Panthers in the trade is No. 191 overall.
Carolina had traded for former New York Jets starting quarterback Sam Darnold earlier this month, making this the second time that Bridgewater was traded after a team acquired Darnold: Bridgewater signed with the Jets in free agency and was then traded before the season after the Jets drafted Darnold.
Bridgewater, 28, had plenty of opportunities last season to establish himself as the Panthers' starter, but he saw his numbers go steadily down as the season concluded, and neither coach Matt Rhule nor GM Scott Fitterer would commit to him as the starter for the 2021 season.
Bridgewater had only one touchdown pass in the fourth quarter all season and was 0-8 in games in which the Panthers had a chance to win or tie on their last possession.
He has a 26-23 career record as a starter over his six seasons in Minnesota, New Orleans and Carolina.
ESPN's David Newton and Jeff Legwold and The Associated Press contributed to this report.