A source told ESPN's Chris Haynes that Payton received a two-year deal and his salary in 2017-18 is partially guaranteed.
Payton provides some coverage in case rookie Malcolm Brogdon's back problem lingers. Brogdon missed his second consecutive game Sunday with back tightness against the Dallas Mavericks. He sat out Friday's win over Detroit and missed two games earlier in March with the same problem.
Payton, 24, made 49 starts for the Rio Grande Valley Vipers of the NBA D-League this season, and averaged 14.1 points, 6.5 rebounds, 3.3 assists and 2.0 steals in 32.7 minutes while shooting 49.8 percent from the field. He wasn't picked in the 2016 NBA draft after playing two seasons at Oregon State.
He is the son of NBA All-Star Gary Payton, who played 28 games for the Bucks during the 2002-03 season.
The Bucks had an open roster spot after waiving forward Terrence Jones on Saturday.
The Associated Press contributed to this report.