Club officials declined comment when asked to confirm the agreement.
Loretta, 37, hit .280 in 261 at-bats for the Astros last season with four homers and 38 RBIs, batting .330 against left-handers. He played 46 games at second base, 17 at third base, five at shortstop and two at first base.
He presumably would take the place of utilityman Nomar Garciaparra, who appeared at three infield positions but is considering retirement because of health issues. Loretta also could spell Blake DeWitt at second base, although the left-handed-hitting DeWitt actually hit 29 points higher against left-handed pitching.
Loretta is a 13-year veteran and two-time All-Star. He earned $2.75 million last year and will receive about $1.4 million in 2009. The Dodgers won the pursuit for Loretta over National League West rival Arizona Diamondbacks.
"Mark's very excited," Garber said. "He grew up in Pasadena, so he's come full circle. He went to his first Dodger game as a 6-year-old."
The Dodgers made a run at Loretta when he was a free agent two years ago, but he signed with the Astros. He's a graduate of Northwestern University.
Ken Gurnick is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.