Billingsley can earn an additional $3 million based on innings under Thursday's deal plus $2 million based on starts and $1.5 million based on time on the active roster.
The 30-year-old had Tommy John surgery on his right elbow on April 24 and spent all of last season on the Los Angeles Dodgers' disabled list. He also had an operation on his right flexor tendon on June 24.
Billingsley averaged over 12 wins and nearly 180 innings per season from 2007-12. He is 81-61 with a 3.65 ERA in 190 starts and 29 relief appearances for the Dodgers, who selected him in the first round of the 2003 amateur draft with the 24th pick.
A 2009 NL All-Star, he has pitched in six postseason games for the Dodgers, three against the Phillies.
Billingsley would earn $250,000 each for one, 30, 60, 90, 120 and 150 days on the active major league roster, and $250,000 apiece for 13 starts and each additional two through 27. He would get $750,000 each for 120, 140, 160 and 180 innings.
His deal also includes award bonuses, among them $50,000 for comeback player of the year.