ESPN and The Houston Chronicle reported Chandler, who turns 37 in October, will return for a 19th NBA season. The veteran center averaged 3.1 points and 5.6 rebounds in 55 games (six starts) with the Phoenix Suns and Los Angeles Lakers last year.
All but seven of those games came with the Lakers after the Suns waived Chandler in early November.
Chandler has averaged 8.4 points and 9.2 rebounds in 1,134 career games. He was the No. 2 overall pick by the Los Angeles Clippers in 2001 before he was traded to the Chicago Bulls that night for center Elton Brand.
Chandler won the 2011 NBA Finals with the Dallas Mavericks and was an All-Star with the Knicks two years later. He was also named NBA Defensive Player of the Year for the 2011-12 season.
Houston went 53-29 last season before losing to the Golden State Warriors in the Western Conference Semifinals.