The Trail Blazers also struck a deal with free-agent center Cody Zeller, as the sides agreed to a one-year contract, his agent Sam Goldfeder of Excel Basketball told ESPN.
The Raptors dealt Powell to the Trail Blazers before last season's trade deadline in exchange for Gary Trent Jr. and Rodney Hood.
Powell, 28, played in 27 regular-season games for the Blazers and averaged 17 points, a number he matched in six playoff games.
A second-round pick by Toronto in 2015, Powell has blossomed into a strong shooter with an ability to create his own shot.
Since beginning to play starter-level minutes in 2019-20, Powell has averaged 17.5 points per game while shooting 48.4% from the field and 40.6% from 3.
Zeller, 29, has played his entire career in Charlotte since getting selected with the fourth overall pick in the 2013 NBA draft.
He started 21 out of 48 games last season, averaging 9.4 points and 6.8 rebounds.
Zeller had said he was angling to join a "winning team" this offseason on an episode of The Woj Pod late last month.
"In my mind, that's a winning team," Zeller said of teams who are consistently competing for home-court advantage in the playoffs. "Even if that means me playing 15, 20 minutes as the backup center on a team like that, that would be my ideal role in free agency."