The speedy running back has signed a one-year contract plus an option with the Edmonton Eskimos, the CFL team said Tuesday during a news conference.
Lumsden is an Edmonton native and his father, Neil, is a former Eskimos player.
"To get a person of his calibre makes our offence even more potent," Eskimos head coach Richie Hall said. "He has the ability to do a lot of different things."
Edmonton was one of four CFL clubs in the running for Lumsden's services: Toronto, Winnipeg and Hamilton were also interested in the former Hec Crighton Trophy winner.
"This is an extremely important day for us," Eskimos GM Danny Maciocia said. "If there was a missing link, it was having a running back who could get the tough yards and allow us to close out football games.
"We think we're going to be so much more explosive and so much more dynamic now."
The six-foot-two, 226-pound Lumsden, who grew up in Burlington, Ont., has the enviable blend of speed and size that makes him a threat going wide while also being able to get the tough yards inside. However, Lumsden, 26, has been forced to shut it down early the last two years due to season-ending shoulder surgery.
Lumsden rushed for 584 yards on 87 carries (6.7-yard average) with five touchdowns last season for the Tiger-Cats after running for 743 yards on 98 carries (7.6-yard average) and three TDs in 2007.
In four CFL seasons - all with Hamilton - Lumsden has run for 1,797 yards on 285 carries (6.3-yard average) and scored nine TDs. The former McMaster Marauders star has recorded 49 career catches for 630 yards (12.9 yards per reception) and two touchdowns.
Lumsden becomes the last of the big-name CFL free agents to come to terms as the other top names made their commitments Monday on the opening day of free agency.
The addition of Lumsden certainly addresses a need for the Eskimos. The club was last in the CFL in rushing last year, averaging just 85.2 yards per game. Hamilton led the league with an average of nearly 141 yards per game.
By comparison, Edmonton led the league in passing, averaging 335.1 yards per game with veteran Ricky Ray under centre. That's prompted a lot of talk that the Eskimos lacked balance and their offence was too predictable and one-dimensional.
The Eskimos have long lacked a consistent runner with the ability to break off long runs. A.J. Harris was the club's leading rusher last season with 557 yards on 99 carries (5.6-yard average) and six touchdowns.
Edmonton has only had four 1,000-yard rushers since 2000, with Hall of Famer Mike Pringle achieving that twice (2003-'04). Troy Davis was the last running back to surpass that plateau in 2006 with 1,060 yards.
Neil Lumsden spent the final six seasons of his CFL career with the Eskimos (1980-'85), helping the club win three Grey Cup titles (1980-'82). He was named the outstanding Canadian in the '81 championship game.