Price appeared in 39 games with the Portland Trail Blazers last season, averaging 2.7 points per game and 13.1 minutes per game.
"We're excited to welcome Ronnie and his family to the Magic organization," Magic GM Rob Hennigan said. "We believe Ronnie's toughness and competitive spirit, along with the varied experiences he's gained throughout his career, will impact the development of our team in a positive way."
Price led Portland in assists once and posted a season-high 10 points on Nov. 18 against the Chicago Bulls.
The Trail Blazers waived Price on Feb. 21, 2013.
Signed as an undrafted free agent by the Sacramento Kings in 2005, Price has played in 394 career games, starting 33, with Sacramento, the Utah Jazz, Phoenix Suns and Portland. In that stretch, he has averaged 3.5 points per game, 1.4 assists per game in 11.6 minutes per game.
The guard also brings playoff experience to the Magic, having appeared in 28 contests, averaging 2.2 points in 6.5 minutes per game.