The Dolphins did not disclose the length of Pennington's deal in the statement but reports suggested it was for one year.
Pennington sustained a season-ending shoulder injury during the third game of last year's regular season and will now have to battle his one-time backup Chad Henne for the starting job.
Pennington, the 2008 NFL comeback player of the year, has a history of shoulder problems that include three operations.
Signed by Miami in 2008 after eight seasons with the New York Jets, Pennington had an immediate impact as he engineered one of the NFL's biggest single-season turnarounds by taking a 1-15 Dolphins team to 11-5 in his first season.
The 33-year-old quarterback has appeared in 89 career games and completed 1,631 of 2,469 passes for 17,804 yards with 102 touchdowns and 64 interceptions.
(Writing by Steve Keating in Toronto; Editing by Frank Pingue)