The 33-year-old Hall was set to make $4.25 million as a base salary in 2017 and had a salary cap hit of $5.1 million. He is recovering from a torn ACL and may not be able to participate in training camp.
Hall told reporters at the Redskins' facility on Wednesday that he agreed to the pay cut this week. He did not share the details of the new deal, but the Washington Post reported that his salary will decrease to $2.3 million, with a $500,000 bonus if he makes the Pro Bowl.
"I'm surprised it hasn't broke yet," Hall said of his contract. "I'll let them leak all the details. But yeah, we did work something out."
In 2016, Hall was lost to a season-ending torn ACL suffered against the New York Giants in Week 3. He has 43 career interceptions.
Hall joined the Redskins as a free agent in 2008 and initially was a cornerback before switching to safety during the 2015 season.
"I've always been a guy who felt like when it's my time to go, it's my time to go," Hall told reporters. "If I can't go out and play, they're not going to keep me around for my smile.
"When I can't do what they're asking me to do, I'll be out of here. But they still feel like I can play. I still feel like I can play."
Hall said he will not rush back for training camp.
"I feel pretty good, and I'm able to do lots of things, but I'm just taking it slow," Hall said. "I want to make sure I'm able to play Week 17 instead of Week 1."
Redskins coach Jay Gruden said he welcomed Hall's return.
"He's kind of been a mainstay here," Gruden said. "He kind of keeps the boat from sinking from time to time. There are some volatile people in that defensive back room from time to time, and he's a calming guy. Hopefully we'll be able to get him back at a later date."