The deal is worth $1.5 million, with $750,000 in incentives, a league source told ESPN NFL Insider Adam Schefter.
Buchanon has started 40 games in the past three seasons for Tampa Bay and Detroit. He was released by the Lions on March 4.
"We are very excited to add a veteran corner, such as Phillip, to our defensive backfield," said Mike Shanahan in a team statement Monday. "He has had a lot of success in this league and brings with him the ability to create turnovers. He will be a big part of what we are trying to accomplish defensively in Washington."
Buchanon, 29, is joining his fifth NFL team. He was drafted by the Oakland Raiders as a first-round pick in 2002. He later played for Houston, Tampa Bay and Detroit. He has 18 career interceptions, but he had none last year in 13 games.