Smid, 25, will make $2.25 million annually. He was set to become a restricted free agent on Friday.
"I was really happy," Smid said, according to the Oilers website. "The negotiations were smooth and it was pretty quick. It only took a couple days to get done. Both sides could see that I really wanted to stay in Edmonton, so it wasn’t a problem and I'm really glad to be part of the team’s future."
But questions are rising over the trade that brought Ryan Smyth back to Edmonton from Los Angeles. It was discovered that forward Colin Fraser, who went to the Kings in the Smyth deal, has an unhealed fracture in his ankle and a cyst that will require surgery, according to reports. His recovery is expected to take four months.
According to the Los Angeles Times, the teams will discuss alternative or additional compensation for the Kings.
Edmonton was originally trying to trade forward Gilbert Brule to Los Angeles, but Brule was not procedurally cleared to play after suffering two concussions this past season.
Edmonton also put Sheldon Souray on waivers on Thursday with the intention of buying out the remaining $4.5 million of contract.
The Oilers acquired Smid in a 2006 trade that sent Chris Pronger to Anaheim. He had 10 assists in 78 games as Edmonton finished last in the league and missed the postseason for a fifth straight season.