The deal will pay Blake $4.2 million over two years.
Blake, 34, returns to the Blazers for his third professional stint with the club. He had a breakout season with Portland 2005-06 when he became a full- time starter for the first time and spent another 2 1/2 years with the team from 2007-2010. He has made 232 starts in 269 games with Rip City in his career.
"Steve is the consummate gamer," said Portland general manager Neil Olshey. "His natural leadership skills, ability to run a team and offensive skill set are a natural fit for our roster composition and style of play."
The veteran point guard averaged 6.9 points and 5.6 assists per game last season for the Lakers and Warriors. In 11 seasons, he holds averages of 6.9 points and 4.0 assists and has made 908 3-pointers.