The club announced the deal Friday.
Multiple reports previously said the deal is for a $2.75 million base salary and includes incentives that could increase the payout to $5 million.
The 41-year-old Ibanez batted .242 with 29 homers and 65 RBIs for the Seattle Mariners last year. He hit his final homer of the season at Angel Stadium on Sept. 21, tying Ted Williams' record for the most homers by a 40-and-over player.
Ibanez has 300 career homers and is seven hits shy of becoming the 18th active major leaguer with 2,000 hits. He played his first major league game with Seattle in 1996, also making stops with the Royals, Phillies and Yankees between three stints with the Mariners.
Information from The Associated Press was used in this report.