Though the team could not confirm a deal had been made as of Wednesday night, the 27-year-old Vasquez tweeted that an agreement was in place via his official Twitter account.
"Happy to be back with the best fans of the NBA — Toronto Raptors fans," wrote Vasquez, who was a restricted free agent.
He also included a link to his instagram account with a photo of him in his No. 21 Raptors uniform.
Teammate DeMar DeRozan also tweeted out a congratulatory message to Vasquez.
"Glad to have the swagged out @greivisvasquez back! Congrats brotha!!!" DeRozan wrote from his verified account.
Vasquez was originally drafted 28th overall by the Memphis Grizzlies in 2010 and joined the Raptors during the 2013-14 season in the trade that sent Rudy Gay to the Sacramento Kings. In 61 games with Toronto, Vasquez averaged 9.5 points-per game and 3.7 assists-per game, splitting time between shooting guard and point guard.
The Venezuelan has also signed on as an ambassador for the Pan American Games in Toronto next summer.