The Detroit Free Press reported the deal is worth $16 million, with $8 million guaranteed.
"I love the city. I'm grateful for being able to be here. The city is going through changes as is the organization," Pettigrew told the club's website.
The Lions needed to re-sign Pettigrew or find another tight end because they otherwise would have been very thin at the position, with only Joseph Fauria and Michael Williams, neither of whom has more than two years of experience.
The 20th overall pick in the 2009 draft out of Oklahoma State, Pettigrew spent the past five seasons as one of Detroit's primary tight ends, specifically known for his ability to both block and run routes effectively.
The 28-year-old has played in 71 games, catching 284 passes for 2,828 yards and 16 touchdowns. Pettigrew also has six fumbles and 34 drops in his five seasons with the Lions.
His role changed in 2013 from being primarily a route-runner -- he caught 59 or more passes each season from 2010 to 2012 -- to a blocker. His receptions (41), yards (416) and touchdowns (two) were all his lowest totals since his rookie season, but that can be largely attributed to his shift in role.
Pettigrew was drafted the same year as Matthew Stafford and has been the quarterback's primary tight end the majority of Stafford's career.