The Dolphins were in search of a signal-caller after starting quarterback Ryan Tannehill sustained a serious left knee injury in pre-season training on Thursday.
Cutler, who had surgery on a shoulder injury in December, was released by the Bears in the offseason and retired to take a television job with Fox Sports in May.
He indicated he would consider a return to the league if the situation was right.
Dolphins coach Adam Gase worked with Cutler as offensive coordinator of the Bears in 2015.
The Miami Herald, citing league sources, reported that Cutler agreed to a one-yer deal worth $10 million plus incentives. That includes a base salary of $5 million.
Cutler could take the starting role ahead of Matt Moore -- Tannehill's backup who helped the Dolphins make the playoffs late last season.
Cutler, 34, enjoyed success in his one season playing under Gase as he compiled a career-best 92.3 quarterback rating. He passed for 3,659 yards and 21 touchdowns against 11 interceptions.
The Dolphins have not announced a timetable for Tannehill's recovery or even if he will undergo surgery, which likely would be season-ending.
Tannehill suffered two sprained ligaments in the same knee last December but did not have surgery.