The 32-year-old right-hander will earn base salary of $1.5 million if he makes the team with a chance to make $4 million if he achieves certain incentives, CBS Sports and The (Cleveland) Plain Dealer reported.
At Cleveland, the ex-Red Sox star will be reunited with former Boston manager Terry Francona, who will be in his first year of leading the Indians in the coming season.
Matsuzaka struggled last year for the Red Sox after coming off reconstructive elbow surgery, going 1-7 with an 8.28 ERA over 11 starts.
The Tokyo native has compiled a 50-37 record with a 4.52 ERA over 117 career games with Boston.
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