The Bills originally claimed the former San Diego Charger off waivers in early November but an Achilles injury prevented Merriman from playing a single down for Buffalo.
"We had been working on it and we agreed on it and got everything signed this morning," Bills General Manager Buddy Nix told the team's website (http://www.buffalobills.com/).
"I know he's a leader. He's been a Pro Bowler. He's only 26 years old and if he's healthy he'll make plays for us and help us win games."
Merriman, known as "Lights Out" because of his hard hits, led the NFL with 39.5 sacks from 2005-07 but has been limited by injuries in recent seasons.
(Reporting by Frank Pingue in Toronto; Editing by Patrick Johnston)