The 34-year-old Ference is entering his 14th NHL season and his first with the Oilers.
"To know that I'm able to come back to my hometown and be so extremely proud to pull on the jersey, letter or not, I know how fortunate I am to have that kind of a path in a career like this," said Ference to media after practice on Sunday.
Drafted in the eighth round of the 1997 Entry Draft, the five-foot-11, 189-pound defenceman has 37 goals, 156 assists and 645 penalty minutes in 760 career games.
The Edmonton native has spent time with the Pittsburgh Penguins, Calgary Flames, and Boston Bruins throughout his NHL career. He helped Boston to its sixth Stanley Cup championship in 2011.
"I think it's great. He has a lot of experience in winning and that's important for our group. We don't really have a lot of that, especially with the young guys here," said forward Taylor Hall. " "He's come in, he's really taken charge.
"Off-ice and on-ice he's a great player and a good guy, so I think it's the right move for us."
Ference also served as an alternate captain with the Bruins for the past two seasons.