The deal announced Sunday includes $7 million salaries for each of the next two seasons and a $7 million team option for 2015.
Street is making $7.5 million this year in the final guaranteed season of a $22 million, three-year contract he agreed to with Colorado in January 2010. He could have exercised a $9 million option for 2013, which San Diego in turn could have declined for a $500,000 buyout.
Street, who turns 29 on Thursday, is 2-0 with a 0.91 ERA and has converted all 17 save opportunities in his first season with the Padres.
"You find a place that you're comfortable with, obvious success makes you feel more comfortable, but also the team, my teammates, wanting to be a teammate with these guys for an extended period of time," Street said. "It's a two-year deal with an option so if the team picks up that option it's three years, that'll be four years here in San Diego, at least. I think the organization itself is a bunch of people that I like, that I like being around, that I want to go play for and ultimately you have to believe in that, you have to believe in everybody involved."
San Diego acquired Street in a trade with Colorado for left-handed pitcher Nick Schmidt in December 2011.
Street has 195 career saves with a 2.97 ERA in eight seasons in the majors after starting his career with Oakland.
"His style of pitching hasn't varied a whole lot from the time he got to the major leagues," Padres manager Bud Black said. "He got to the major leagues awful fast and he's still 28 years old. The next number of years I don't see his style of pitching changing. He takes a great responsibility in his fitness, in his conditioning and what it all means to be a professional athlete."