Pietersen is free for the first time to feature in a full Indian Premier League campaign, following his axing as a contracted England player at the age of 33 which has effectively signalled the end of his international career.
The IPL announced on its official Twitter feed on Wednesday morning that Pietersen would play for the Daredevils in the 2014 season. The team agreed to pay 90million Indian rupees (around £880,000) for Pietersen at the pre-season auction.
The IPL said in a tweet:
"@KP24 will play for @DelhiDaredevils who have snapped him up for Rs. 900 lacs using their right to match card against SRH. #IPLAuction"
The 'Right to Match' system has been introduced to this year's IPL auction as a means for teams to buy back up to five of their core players from previous campaigns.
The Daredevils announced last month that they had opted not to retain any of their players, including Pietersen. Since then, however, Pietersen has become available to play a full IPL campaign following the cancellation of his central contract, and Delhi opted to match the bid made by rivals Sunrisers Hyderabad.
Pietersen was not the Daredevils' most expensive acquisition however, as they invested 125million rupees (around £1.2million) in Indian wicketkeeper-batsman Dinesh Karthik. They also recruited Indian opening batsman Murali Vijay and South African JP Duminy.
As of 0530GMT, the most expensive player in the auction was Yuvraj Singh, who signed for Royal Challengers Bangalore for 140million Indian rupees (just under £1.4million). That was still shy of the £1.5million paid by Kolkata Knight Riders for Gautam Gambhir in the 2011 auction.
Pietersen was last week left out of the England squads to tour the Caribbean and for the ICC World Twenty20 in Bangladesh.
The decision to effectively retire England's leading runscorer across all formats has been widely criticised, in particular by chat show host Piers Morgan, a friend of Pietersen.
Both sides in the dispute have been bound by a confidentiality agreement, but the England and Wales Cricket Board did say in a statement released on Sunday that Pietersen's removal from the team stemmed from a lack of trust.
The IPL season begins in April. As well as previously playing for the Daredevils, Pietersen has also featured in the IPL for Royal Challengers Bangalore.
The Sunrisers went in for another explosive batsman after missing out on Pietersen, signing Australian David Warner for 55million rupees (around £530,000) while England's Ashes nemesis Mitchell Johnson signed for Kings XI Punjab for 65million rupees (over £630,000).
Pietersen's fee was lower than some estimates made prior to the auction, with former IPL commissioner Lalit Modi telling the BBC last week that he thought the player could attract a record bid in the region of 3million US dollars, which equates to over £1.8million.
Pietersen was unable to feature at all for Delhi last year because of a knee injury which kept him out of all cricket for three months.
Pietersen has moved quickly to put plans in place for his future, after it was announced on Monday that he had agreed a deal to play for Surrey in the new domestic t20 Blast tournament.
The deal also included scope for Pietersen to play for Surrey in the County Championship. Pietersen had previously represented Surrey under an agreement struck as part of his central contract with the ECB.
Pietersen became available for the IPL and the county season when the ECB announced last week he was not part of England's future.
The ECB said in a joint statement with the Professional Cricketers' Association on Sunday evening: ''We must invest in our captain Alastair Cook and support him in creating a culture in which we can be confident he will have the full support of all players, with everyone pulling in the same direction and able to trust each other.
''It is for those reasons that we have decided to move on without Kevin Pietersen.''
Pietersen has a history of clashing with authority figures in the England set-up, having successfully lobbied in January 2009 for the removal of then coach Peter Moores.
That also cost him his own position as captain, and he almost saw his international career end in 2012 after sending derogatory text messages about then captain Andrew Strauss to members of the touring South Africa team.
Pietersen later tweeted: