The deal with Teheran, 23, was another move by the team to lock up a key young player on a long-term deal. First baseman Freddie Freeman, 24, agreed to a $135 million, eight-year deal Feb. 5, the same day the team announced a two-year, $13.3 million deal with right fielder Jason Heyward, 24.
Braves announced the agreement with Teheran on the day pitchers and catchers had their first workout in spring training.
Braves general manager Frank Wren said Teheran is "one of the best young pitchers in the National League and one of our core of players we expect to be together for a number of years."
If the Braves exercise their $12 million option for the 2020 season, Teheran will earn more than $44 million over the next seven years.
Teheran, who had been regarded as a top prospect, realized those expectations in 2013, when he became an important member of the rotation as a rookie. He was 14-8 with a 3.20 ERA and finished fourth in voting for NL rookie of the year.
"I couldn't wait to see him pitch last year," Braves manager Fredi Gonzalez said. "He had a tougher time pitching in Triple-A."
Teheran led all rookies with a strikeout-to-walk ratio of 3.78, ranking seventh among all NL starting pitchers.
Teheran received a $1 million signing bonus and will earn $800,000 in 2014. His annual salaries will go up to $1 million in 2015, $3.3 million in 2016, $6.3 million in 2017, $8 million in 2018 and $11 million in 2019.
Teheran joins Kris Medlen and Mike Minor as leaders of a young rotation that lost Tim Hudson and Paul Maholm to free agency. Brandon Beachy is expected to earn the fourth spot in the rotation as he continues his comeback from 2012 elbow ligament-replacement surgery. Beachy, a right-hander, had a follow-up procedure to clean up the right elbow last season.
Gonzalez said he is looking for someone to take over as a leader of the staff.
"It's early but I feel good about this team," Gonzalez said. "We lost (Hudson) but we still had the ERA title last year. I like what we have, and everybody is ready."
Left-hander Alex Wood and veteran Freddy Garcia are expected to lead the competition for the final spot in the rotation until free-agent signee Gavin Floyd completes his recovery from elbow surgery. The Braves expect Floyd to be ready to pitch as early as May.
"Alex Wood helped us win the division last year," Gonzalez said. "I am comfortable with what we have coming back this year. You can never have too much pitching."
In other Braves news Friday, catcher Orrin Sears was suspended for the first 50 games of the season following a positive drug test under the minor league drug program.
The commissioner's office said Friday that Sears tested positive for metabolites of methandienone.
NOTES: Braves special assistant to the general manager Jim Fregosi, 71, died Friday in Miami. Gonzalez expressed his appreciation for Fregosi, who managed four teams during his 53-year professional baseball career. "This is a day of mixed emotions," Gonzalez said. "We lost one of our family members." ... Floyd has impressed Gonzalez so far. "He looks like he's ready," Gonzalez said. "The way he throws in batting practice, it's like he's never been away." Floyd was 0-4 in five starts for the White Sox last season.
Information from The Associated Press was used in this report.