The addition of Freeney also helps cushion the loss of outside linebackers Antwan Barnes and Shaun Phillips to free agency.
"It's great to add a solid veteran who brings valuable experience to our defense," Chargers coach Mike McCoy said in the release announcing the deal. "His proven pass-rush ability is a perfect fit for our defense."
Freeney is 33 and entering his 12th season. He will make $5.25 million this season.
He was Indianapolis' career sacks leader with 107 ½ but the Colts decided not to re-sign him in the offseason. After recording 13 ½ sacks in 2009, his totals declined each of the past three years. He had five in 2012.
Freeney, a seven-time Pro Bowler, never seemed comfortable after moving from a 4-3 defensive end, where he spent his first 10 NFL seasons, to a 3-4 outside linebacker. The Chargers run a 3-4 defense.
Freeney was the 11th overall selection in the 2002 draft. During his time with the Colts, he combined with Robert Mathis to form one of the most fearsome pass-rush tandems in the league. His 44 forced fumbles are the most by any NFL player since 2002 and he was one of 13 players in Colts' history to participate in more than 100 victories.
Freeney led the NFL with 16 sacks in 2004.
Chargers rookie general manager Tom Telesco was with the Colts before being hired by San Diego in January.