The move guarantees Hardy's $13 million salary and applies it immediately to the cap of the Panthers, who have 20 unrestricted free agents and want to sign quarterback Cam Newton to an extension.
The move means Hardy is obligated to take part in mandatory team activities. It also eliminates Hardy's participation in the free-agent market, which was unlikely to create an offer since any team signing him would surrender two first-round picks.
The Panthers, who placed the franchise tag on Hardy last week, secured him for one more season. The 25-year-old is guaranteed between $12,455,000 and $12,623,000 this season.
"I'm happy with it,'' Hardy told ESPN.com last week.
The Panthers said last week they would continue to negotiate on a long-term deal with Hardy. The franchise tag will afford them time to come up with a more lucrative package for 2015 and beyond, when the team isn't as strapped under the salary cap, as general manager Dave Gettleman has said repeatedly.
Sources told ESPN.com that the sides weren't close enough on a long-term deal to reach an agreement. Prior to placing the tag on Hardy, the Panthers were about $24 million under the cap if it is set near $133 million, as has been reported.
"The franchise mechanism gives us time to secure the services of a very good player while we continue to look at the future of Greg with the Carolina Panthers,'' Gettleman said in a prepared statement. "We have had a great dialogue with both Greg and his agent. It was important to keep our defensive front together.''
Hardy led the Panthers with 15 sacks last season en route to making the Pro Bowl for the first time. He has 26 sacks over the past two seasons after having only seven in his first two seasons.
A sixth-round draft pick in 2010, the 6-foot-4, 290-pound Hardy often refers to himself as "The Kraken'' and said several times late in the season that he wanted to return to Carolina. He at one point said he would give the Panthers a "hometown'' discount if it was within reason of what other teams might offer.
Panthers coach Ron Rivera said repeatedly after the season ended that he wanted Hardy back and that he was an important part of the league's No. 2-ranked defense.
"He was a big reason we were able to lead the league in sacks last year, and [this] keeps our defensive line intact,'' Rivera said.
Hardy is the fifth player in Carolina history to receive the franchise tag. The others were punter Todd Sauerbrun (2003), tackle Jordan Gross (2008), defensive end Julius Peppers (2009) and center Ryan Kalil (2011).
ESPN.com Panthers reporter David Newton contributed to this report.