Ricciardo, who has won eight times in F1 - seven with Red Bull between 2014 and 2018 - has been dropped by McLaren after an underwhelming two-season spell.
But the 33-year-old has been handed a temporary lifeline by Red Bull and will serve as backup to double world champion Max Verstappen and Sergio Perez.
Helmut Marko, Red Bull's motorsport adviser, revealed to German television in Abu Dhabi that Ricciardo, who discussed a reserve role with Mercedes, has signed a contract with the Milton Keynes team.
"We have not signed anything yet, but in Helmut's enthusiasm, he has announced it, so I guess that means Daniel will be joining us unless he chooses not to sign it," said Horner.
"Daniel is a big character and it has been disappointing to see his performances this season, but he is still one of the biggest names and biggest characters in Formula One.
"With the demands on the race drivers, from a marketing perspective alone, to have a driver of Daniel's profile and history with the team within the group is only an asset for us.
"He keeps in touch with Formula One and we will be using him on the simulator and attending some events."
Verstappen secured his second world title with four rounds to spare this season, while Red Bull wrapped up their first constructors' championship since 2013 last month in the United States.
But they arrived for the final race of the year in Abu Dhabi following a row between Verstappen and Perez at the previous round in Brazil.
Verstappen ignored a team order to trade positions on the final lap to help Perez finish second in the standings.
Verstappen said he refused to give up sixth place because of a previous incident with Perez this season.
It is understood Verstappen believed Perez deliberately crashed in qualifying at May's Monaco Grand Prix to deny him pole position. Perez and Red Bull have denied Verstappen's accusation.
Horner added: "The dynamic between the drivers is absolutely fine, and this weekend the objective is to achieve a one-two finish in the championship. That would cap off an unbelievable year.
"As a team, we made mistakes in Brazil. We learnt from those mistakes and we move on. Max's season has been on another planet so we won't let a couple of laps in Brazil dictate the year for us."