According to a source, the two-year contract is worth $7 million. Benson is expected to be the Bengals' starting running back this season.
After being cut by the Bears last summer and dealing with legal troubles in Texas, Benson signed with the Bengals and resurrected his career. He rushed for 747 yards on 214 carries and scored two touchdowns.
"Cedric was recognized as an elite talent coming out of college," Bengals coach Marvin Lewis said Tuesday. "His years in Chicago weren't what he hoped for, but he was able to give us a lift on the field and be a great presence in the locker room. He earned everyone's respect, and we're excited to let him continue to grow in our system."
Benson, 26, spent three seasons with the Bears before being released.
John Clayton is a senior NFL writer for ESPN.com. Information from The Associated Press was used in this report.