The agreement is reportedly worth $21 million with $10 million guaranteed, sources told ESPN's Adam Schefter.
Callahan previously played for the Bears under current Broncos head coach Vic Fangio, who served as Chicago's defensive coordinator.
The 27-year-old recorded 45 tackles, two sacks, and two interceptions before being placed on injured reserve late in the 2018 season with a foot injury.
Callahan signed with Chicago as an undrafted free agent in 2015. He's played his whole career with the Bears so far, and will now join corners Chris Harris Jr. and newly signed Kareem Jackson in the Broncos' secondary.