The contract is front-loaded, according to a league source, with roughly $13 million coming in the first two years. Daniels will sign the deal after passing a physical.
The Texans confirmed later Thursday that they had agreed to deals with Daniels, running back Derrick Ward and defensive tackle Shaun Cody, but they didn't reveal financial terms.
Daniels played in 11 games last season and started 10 after coming back from reconstructive surgery on his right knee. He caught 38 passes for 471 yards and two touchdowns.
Daniels has the distinction of being the first Texan to catch a touchdown pass in a Pro Bowl. But he tore his right anterior cruciate ligament midway through the 2009 season and underwent surgery in November that year.
Daniels was on schedule to be ready for the start of training camp until the spring, when doctors found a stress fracture in his right kneecap, a potentially career-threatening setback. He stayed off the knee for weeks, it healed on its own, and he played in the Texans' 2010 opener, a 34-24 victory over the Indianapolis Colts.
Ward confirmed via Twitter that he agreed to a one-year contract, writing, "Ive re signed with the Houston Texans! Thank you to all my Family Friends and Fans wont let u down! Indy or Bust!"
According to the Houston Chronicle, Ward will be paid $1.75 million next season, half in base salary and half in bonus.
The Associated Press contributed to this report.