The agreement was earlier announced by Yahoo! Sports.
The contract is worth a reported $4.2 million with a player option for the second year.
Blake has had two previous stints with the Blazers, most recently from 2007-09, becoming a fan favorite before going on to play for the Lakers, Clippers and Golden State Warriors.
Blake has averaged 6.9 points, 4.0 assists and 2.2 rebounds over an 11-year NBA career. Last season he averaged 7 points and 5.6 assists, splitting the season between the Lakers and Warriors.
The Trail Blazers can use Blake to help back up All-Star guard Damian Lillard. Mo Williams, who was first off the bench last season, is a free agent this summer and has reportedly talked to the Dallas Mavericks.
Blake also has a relationship with center Chris Kaman, who agreed to terms with the Blazers last week. Kaman, who signed a two-year deal worth a reported $9.8 million, will back up starting center Robin Lopez.
The Blazers used their midlevel exception to sign Kaman and their biannual exception to sign Blake.
Blake's wife, Kristen, was excited about the news on Twitter:
Thank you for the welcome back tweet #RipCity and the well wishes #LakerNation! Excited for our new adventure!
- kristen blake (@kristenblake2) July 10, 2014Blake signed with the Blazers as a free agent in 2005 then was traded the next season to the Milwaukee Bucks. He signed with Portland again in 2007 before being traded to the Clippers in 2010.
Blake's best season came in 2008-09 with Portland, when he started and averaged a career-high 11.0 points.
The Associated Press contributed to this report.