Stackhouse will join the Bucks when they return to Milwaukee and may see action in their next game on Wednesday. Coach Scott Skiles says he will be activated for Wednesday's game against Toronto.
The former All-Star guard has been looking for a new team since the summer and was targeted by the Bucks -- who began play Sunday two games out of the final playoff spot in the East -- after Michael Redd suffered a season-ending knee injury this past Sunday in Los Angeles against the Lakers.
"We're not signing him to be on the inactive list," Skiles said. "We'll activate him right away and get him in a game. That's our plan."
Foot and knee problems limited Stackhouse to just 10 games last season with Dallas, but the 35-year-old has insisted for months that he is healthy and ready to return to the league.
After an audition for the New York Knicks in August, Stackhouse rejected an invitation to Houston Rockets training camp in October to replace the injured Rashad McCants when the Rockets told Stackhouse he'd have to win a roster spot in camp to stick.
Skiles said he was impressed by Stackhouse's level of fitness in a recent workout.
"He's not in midseason shape or anything, but considering he's been out so long, he was in surprisingly good shape," Skiles said. "We're hoping he can do what he's done in his career, come in and score some points. He's always had a pretty high level of toughness, he's not afraid to attack the rim and get to the line. We're hoping he can do those things for us."
Stackhouse has a lifetime scoring average of 18.4 points per game and has made two trips to the All-Star Game in a 14-season career with four teams. He became an unrestricted free agent in July after the Memphis Grizzlies bought out the final year of his contract for $2 million after Stackhouse was included in the four-team trade headlined by Dallas' acquisition of Shawn Marion and Toronto's sign-and-trade acquisition of Hedo Turkoglu.
Marc Stein is a senior NBA writer for ESPN.com. Information from The Associated Press was used in this report.