The Thunder made the announcement in a news release on Tuesday. Terms were not disclosed.
Telfair joins the Thunder after spending last season with Tianjin Ronggang in China, where he averaged 26.1 points, 6.0 assists and 2.0 steals.
The 13th overall pick in the 2004 NBA Draft, Telfair owns career averages of 7.4 points, 3.5 assists, 1.6 rebounds during nine seasons with Portland, Boston, Minnesota, the Los Angeles Clippers, Cleveland, Phoenix and Toronto. In his most recent NBA season, he averaged 5.6 points and 2.6 assists in 60 games for Phoenix and Toronto.
The Thunder needed to fill the position because Derek Fisher now coaches the New York Knicks.