The deal will carry an annual value of $800,000 in the NHL and $125,000 in the American Hockey League.
Fraser, 28, spent time with both the New Jersey Devils and the AHL's Albany Devils last season, recording four assists and 55 penalty minutes in 34 games with New Jersey. The Ottawa native had three points (one goal) and 45 penalty minutes in 18 games with Albany.
Fraser will add depth to the blue line after the Senators suspended young defenseman Mikael Wikstrand for leaving training camp and returning to Sweden.
Fraser appeared in two preseason games with Toronto on a professional tryout before being cut.