The deal is worth $4.6 million -- Niskanen will earn $2.1 million next season and $2.5 million in 2013-14 -- a source told ESPN.com's Pierre LeBrun.
Niskanen will rejoin the Penguins for a second full season after his acquisition in a trade with the Dallas Stars in February 2011. He was a first-round draft pick by Dallas in 2005 and began his NHL career two years later.
Niskanen missed the first two games of the playoffs for the Peguins after injuring his shoulder late in the regular season. Pittsburgh was eliminated in six games by the Philadelphia Flyers in the first round.
The 25-year-old Niskanen had four goals and 17 assists in 75 games last season and a plus-nine rating. Niskanen came to the Penguins in the same trade that brought forward James Neal to the team.
Niskanen has proven to be a deft penalty killer for the Penguins and is considered a key part of the blue line after the team shipped Zbynek Michalek to Phoenix last week.
Information from The Associated Press was used in this report.