The deal is worth just shy of $15 million and can be worth up to $19 million if he reaches incentives.
Sensabaugh, who started 15 games for the Tennessee Titans last season, will be counted on to help fill the void at the cornerback spot created when Janoris Jenkins signed a long-term contract with the New York Giants last week.
The Rams also will have cornerback E.J. Gaines returning from injury next season. Gaines missed the entire 2015 season after suffering a Lisfranc injury in training camp.
Cornerback Trumaine Johnson received the Rams' franchise tag on March 1. He signed the tender worth $13.952 million on March 9.
It is expected that Sensabaugh will compete with Gaines for the outside cornerback spot opposite Johnson.
Sensabaugh, 27, played for current Rams defensive coordinator Gregg Williams when he was Tennessee's senior assistant defensive coach in 2013. If he doesn't win the competition with Gaines, Sensabaugh has the flexibility to play nickel as he did under Williams in Tennessee.
Sensabaugh played 59 games in his first four seasons with the Titans, including 27 starts. Best suited to be the Titans' nickelback, he was forced into increased action in 2015 when a sports hernia injury limited Jason McCourty to only four games.
Sensabaugh was originally a fourth-round pick out of Clemson in 2012.
ESPN Titans reporter Paul Kuharsky contributed to this report.