The deal includes $14.5 million in guaranteed salary, per ESPN's Adam Schefter.
Hankins recorded 43 tackles, three sacks and one forced fumble while playing in all 16 games last season with the New York Giants. The 25-year-old played with Jason Pierre-Paul, Olivier Vernon and Damon Harrison on a Giants' defense that ranked third against the run last season.
Hankins, who visited the Colts on Tuesday, will be asked to help an Indianapolis defense that ranked 25th versus the run last season. He joins a line that is currently manned by David Parry, Al Woods, Margus Hunt and T.Y. McGill.