The contract will pay Bautista $18 million in 2017, and the deal also includes a $17 million mutual option for the 2018 season (with a $500,000 buyout by either side) and a $20 million vesting option for 2019 that becomes guaranteed if Bautista has 300 games played during the next two seasons and does not have a physical impairment that would prevent him from playing.
Bautista, 36, rejected Toronto's one-year, $17.2 million qualifying offer in November, becoming a free agent after spending the past eight-plus seasons with the Blue Jays.
Despite being a six-time All-Star and the face of the Blue Jays franchise, Bautista reportedly had not received any lucrative contract offers in free agency, leading to widespread speculation that he was willing to accept a short-term deal.
After averaging 38 home runs and 97 RBIs per season from 2010 to 2015, Bautista struggled throughout the 2016 season, battling nagging injuries and finishing with just 22 home runs and 69 RBIs.
Bautista (265) ranks second behind Carlos Delgado (336) on Toronto's career home run list. After Toronto ended a 22-year playoff drought with an AL East title in 2015, Bautista hit a memorable three-run homer in Game 5 of the AL Division Series against Texas, punctuating his shot with a bat flip.
The Associated Press contributed to this report.