He was given a six-month drugs ban by the Football Association while playing for Chester in 2008.
Meanwhile forward Lee Tomlin has signed a new deal, which will keep the former Rushden & Diamonds man at London Road until 2015.
Tomlin, 22, has scored nine times in 33 games since arriving at Peterborough in August.
"It is a lengthy contract," boss Darren Ferguson told
the club website.
"Lee knows our ambitions and I think it is important we get it out of the way because coming into March we need everybody focused on the job in hand.
"In his first season at this level he has proved he can handle it and I believe he can play in the Championship no problem at all."
I always give 100% commitment. That will never be in question and I just can't wait to get started
Paul Taylor
Taylor arrives having spent the last two years in Belgium.
He started is career at non-league Vauxhall Motors before a making a loan switch to Chester in August 2008.
He played nine times in League Two before making the move a permanent one, but his career with the Blues was a chequered one.
After failing on numerous occasions to turn up for training sessions,
and twice for matches,
he received written and verbal warnings from the club.
Ferguson said: "He is a good age. He has had one or two problems off the pitch, but we are prepared to take chance on him.
"We won't be rushing him as his fitness is nowhere near at the minute, but he has plenty of potential and we need to fulfil that potential together."
Taylor added: "I always give 100% commitment. That will never be in question and I just can't wait to get started."
Source: BBC Sport
Source: BBC Sport