The team made the announcement Tuesday. The sides had an agreement last week pending a physical.
The 38-year-old Colon, a former A's nemesis during his four-year stint with the AL West rival Angels from 2004-07, went 8-10 with a 4.00 ERA in 29 appearances and 26 starts last year for the New York Yankees in his 14th big league season. He won the 2005 AL Cy Young Award.
Last month, the A's traded away starter Trevor Cahill to Arizona and All-Star lefty Gio Gonzalez to the Nationals. Oakland also sent All-Star closer Andrew Bailey to the Red Sox on Dec. 28. On Jan. 16, the A's acquired outfielder Seth Smith from Colorado in a swap that sent right-hander Guillermo Moscoso and left-hander Josh Outman to the Rockies. They were two other potential starters.
"We thought it was important to find another veteran starting pitcher who could give the group of younger arms a little breathing room as a number of them work toward making their first Opening Day rotation in the big leagues," assistant general manager David Forst said.
When healthy, the hard-throwing Colon has been impressive at Oakland Coliseum where he will now pitch regularly. He is 5-1 with a 2.14 ERA and an opposing batting average of .179 in seven appearances in the A's aging ballpark.
Oakland general manager Billy Beane is in a rebuilding mode with hopes that commissioner Bud Selig will rule the franchise can relocate some 40 miles south to San Jose and build a new ballpark. But the San Francisco Giants hold the territorial rights to technology-rich Silicon Valley. Selig said at last week's owners meetings a resolution "is very much on the front burner."
He appointed a committee in March 2009 to study the situation.
Colon will join a rotation featuring Brett Anderson and Brandon McCarthy. Left-hander Dallas Braden, who pitched a perfect game on May 9, 2010 against Tampa Bay but is recovering from surgery on his pitching shoulder and it's unclear when he will be ready in 2012.
Braden received a $3.35 million, one-year contract in mid-December. He made three starts last season before being sidelined by a shoulder injury. He was 1-1 with a 3.00 ERA before going on the disabled list April 18. He had surgery to a repair a torn capsule in his left shoulder May 17.
The A's haven't been to the playoffs or posted a winning record since being swept by the Tigers in the 2006 AL championship series.