Lin was effective as a backup and mentor to Hawks' first-round pick Trae Young.
Toronto will be his eighth employer in nine seasons in the league.
In 51 games (one start) with the Hawks, Lin averaged 10.7 points, 3.5 assists and 2.3 rebounds on.466 FG%,.333 3FG% and.845 FT% in 19.7 minutes per contest.
The veteran point guard is expected to play a significant role behind and alongside guards Kyle Lowry, Danny Green and Fred VanVleet, adding much-needed depth after the departure of Delon Wright and CJ Miles.
The plan to enter into an agreement with Lin comes one day after the Raptors finalized the conversion of two-way player Chris Boucher's contract to an National Basketball Association standard contract.
Toronto is now 41-16 and leading the Eastern Division.
Lin averaged 14.6 points in 35 games for the Knicks that season, a huge uptick from his rookie season with the Golden State Warriors when he was used sparingly. He has been part of three previous playoff runs, in 2013 and 2014 with Houston and in 2016 with Charlotte.