The deal comes after the NBA, which owns the Hornets, controversially vetoed a trade that would have sent Paul to the Los Angeles Lakers last week.
Commissioner David Stern defended that decision while announcing the deal on Wednesday.
"It is our belief that the proposed transaction tonight is better than the transaction that I did not sign off on," Stern told reporters on a conference call.
"It is our responsibility to make (the Hornets) as attractive and competitive as we can and make sure we have an owner that will keep them in New Orleans."
A four-times All Star, Paul was set to become a free agent after this season when it was believed he would leave the Hornets.
Teams were lining up with proposed deals to acquire his services, but in the end it was the Cl ippers who put together the offer that appeased the NBA.
Paul averages almost 19 points per game and 10 assists for his career and is the latest addition to a revamped Clippers roster.
The team also acquired forward Caron Butler and point guard Chauncey Billups this off-season to team up with Blake Griffin.
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