The signing was made official when the club made the announcement on Monday.
"I view it as a guy that, when he's healthy, can help us at some point during the year," Reds general manager Wayne Krivsky said. "He'll make us a better team if he's 100 percent and ready to go."
Guardado will earn a $500,000 base salary if retained on the Major League roster. The lefty can earn a $1.4 million roster bonus if he's healthy and is the Reds' closer before the All-Star break. An additional $1.2 million bonus can be earned if he finishes 30 games in 2007.
There is also a $3 million club option for 2008 with no buyout clause included. Bonuses Guardado earns in 2007 can be added to the figure of his 2008 base salary, which could increase the total to $7 million.
Guardado is coming off September ligament replacement surgery on his left elbow. Recovery and rehabilitation from this type of procedure often take between nine and 12 months, which means that the earliest he could take the mound for Cincinnati would likely be June.
"I'm very happy," Guardado said Monday from his home in Southern California. "I just want to get out on the field. I have somewhere to go to work out, prepare, get ready and have a routine. I'm looking forward to getting after it."
For over two weeks, Guardado has been playing catch at distances of up to 90 feet. But he has yet to throw off of a mound.
"It doesn't hurt me when I throw," Guardado said. "I feel great. Everything is good. I can't complain. I'm getting anxious to get at it so we can do something good this year."
The Reds acquired Guardado from the Mariners on July 6 for Minor League pitcher Travis Chick. He earned $6.25 million last year.
Guardado had lost his closer's role in Seattle but solidified the Reds bullpen by converting eight of 10 save chances with a 1.29 ERA in 15 appearances. The nice run ended when the 36-year-old blew out his left elbow on Aug. 19.
With this deal, the Reds wouldn't have to use up a 40-man roster spot for Guardado during camp.
The Reds haven't named a closer for their Major League roster. Krivsky and manager Jerry Narron have said that right-hander David Weathers and lefty Mike Stanton would likely share the ninth-inning role with young lefty Bill Bray and others also in the mix.
Guardado, who broke into the Majors in 1993 with the Twins, is a two-time All-Star with a career high of 45 saves.