Dunn's contract reportedly contains a player option for the second year, allowing him to enter free agency again in 2021.
The 26-year-old established himself as a defensive stopper following three seasons with the Chicago Bulls. He scored 7.3 points per game and chipped in 3.6 rebounds and 3.4 assists in 51 appearances last season. He also averaged two steals, the second-best mark in the league behind only Philadelphia 76ers star Ben Simmons.
He's expected to provide defensive help alongside Atlanta's rising star Trae Young while also giving the team another option for ball-handling duties.
Dunn became a free agent after the Bulls declined to tender him a qualifying offer. The Los Angeles Clippers were also reportedly expected to be interested in the 2016 fifth overall pick.