Yates, 29, becomes the fourth quarterback on the Bills' roster and the only veteran behind starter Tyrod Taylor. Buffalo also has 2016 fourth-round pick Cardale Jones and Josh Woodrum on the offseason roster.
Yates, who visited with the Bills last week, is a former fifth-round pick of the Houston Texans in 2011 out of North Carolina. He made five starts in his rookie season.
After three seasons as a backup, the Texans traded Yates to the Atlanta Falcons in 2014. The Falcons released Yates before the 2015 season and he re-signed with the Texans.
In his 18 regular-season appearances, Yates has thrown for 1,534 yards with six touchdowns and eight interceptions.
The Bills also signed defensive end Ian Seau, the nephew of Hall of Fame linebacker Junior Seau.
Ian Seau, 24, joined the NFL as an undrafted free agent in 2016 with the Los Angeles Rams where he played for current Bills defensive line coach Mike Waufle. He was released by the Rams on Sept. 3.
Seau played his college football at Nevada where he tallied 100 tackles, 31 tackles for loss, 17.5 sacks and seven forced fumbles. At Nevada, he played for current Bills assistant defensive line coach Bill Teerlinck.