Holyfield was seeking a bout with WBA heavyweight champ Roy Jones Jr. Instead, he will face the current IBF cruiserweight champion.
The fighters have not decided on a location yet, as the deal was made quickly.
"This was made quickly because you had two sides that wanted to do something that was there," said Jim Thomas, Holyfield's co-manager. "It was clear that James wanted to fight and Evander wanted to fight."
Holyfield (38-5-2, 25 KOs) comes off a unanimous decision loss to Chris Byrd for the vacant IBF title in December. He was hoping to get a shot at Jones' title. He also was a cruiserweight champ before capturing his first heavyweight belt in October 1990.
Toney (66-4-2, 42 KOs), who went more than seven years without a major title bout before a hard-fought unanimous decision over previously undefeated Vassiliy Jirov on April 26, will be fighting as a heavyweight for the first time.