According to the Indianapolis Star, the deal for the former New Orleans Hornets All-Star is worth $20 million over two years.
West became an unrestricted free agent in June when he declined his player option for the 2011-12 campaign. He spent each of his first eight NBA seasons with the Hornets.
"David looks at the Pacers as a good young team with a lot of potential," West's agent, Lance Young, told the Star. "He feels his experience and leadership will help a team like the Pacers."
West had his 2010-11 campaign cut short in late March with a torn medial collateral ligament. He was averaging a team-best 18.9 points to go along with 7.6 rebounds in 70 games last season before suffering his injury on March 24 against Utah.
The 31-year-old veteran is a two-time All-Star and has career averages of 16.4 points and 7.3 rebounds over 530 games, including 438 starts. New Orleans selected West with the 18th pick in the 2003 NBA Draft.