The deal also includes a non-guaranteed two-way contract for next season, according to league sources.
Cannady previously signed a 10-day deal with Orlando on April 6 before being released earlier this week as the team signed forward/center Donta Hall to add frontcourt depth. The Magic then created a two-way opening when they waived rookie guard Karim Mané on Tuesday.
The Magic signed forward Robert Franks to a 10-day contract on Monday and are now at their roster maximum with 17 players, including two-way players Cannady and Chasson Randle.
In three games this season with the Magic, Cannady shot 40.