Widely regarded as the No. 1 free agent on the 2011 market, Nene was pursued vehemently by teams such as New Jersey, Houston and Indiana.
But all of his suitors knew that his preference was to stay with the Nuggets, with whom he's played his whole career.
The deal, sources say, will pay Nene an average of $13.5 million over the next five seasons, which is one season longer than any other team could offer.
Earlier Tuesday, Denver acquired swingmen Rudy Fernandez and Corey Brewer from the Dallas Mavericks for a future second-round pick to add much-needed depth in the wake of the departures of three free agents to China during the lockout: Wilson Chandler, J.R. Smith and Kenyon Martin.
The Nuggets still want to sign Chandler when he returns to the United States, most likely in March, but fending off the competition to keep Nene was always Denver's No. 1 offseason priority.
"He's a Nugget," Denver's executive vice president of basketball operations Masai Ujiri said during his first visit with reporters following the end of the lockout.
Nene's wife is from Denver and his close ties to the organization were only cemented by the way that the Nuggets nursed him through a serious knee injury in the first game of the 2005-06 season and a subsequent fight against testicular cancer in January 2008.
The deal struck by Nene and agent Dan Fegan certainly validates their decision to opt out of his originally scheduled $11 million salary for next season and to turn down a four-year, $50 million extension offer from the Nuggets last summer.
Marc Stein is a senior writer for ESPN.com.