Smyly will receive $10 million over two years, and he can earn $7 million in performance bonuses, a source told ESPN's Jerry Crasnick.
Smyly, the Seattle Mariners' big offseason acquisition last season, never threw a regular-season pitch due to arm troubles that eventually led to Tommy John surgery in June. Because the typical recovery time from ulnar collateral ligament reconstruction is 12 to 15 months, Smyly is likely to miss most or all of the 2018 season, as well.
Smyly was slotted to be Seattle's No. 4 starter after being acquired in the offseason in a trade from the Tampa Bay Rays. He was impressive early in spring training and in his one start for the United States during the World Baseball Classic. But Mariners general manager Jerry Dipoto said Smyly did not seem the same after returning from the WBC, and further examination revealed the injury.
Smyly, 27, is 31-27 with a 3.74 ERA over parts of five seasons with the Detroit Tigers and the Rays. Seattle acquired him from Tampa Bay in January in a trade for shortstop Carlos Vargas, pitcher Ryan Yarbrough and outfielder Mallex Smith.
His best season came in 2016, when he went 7-12 with a 4.88 ERA and threw a career-high 175.1 innings and struck out 167. It came two years after being acquired from Detroit in the 2014 trade deadline deal that sent David Price to the Tigers.
In other developments on Tuesday, the Cubs officially announced the signing of reliever Brandon Morrow to a two-year contract.
The 33-year-old Morrow went 6-0 with a 2.06 ERA and two saves in 45 appearances for the National League champion Los Angeles Dodgers last season. He also pitched in 14 playoff games, helping the Dodgers eliminate the Cubs in the National League Championship Series.
ESPN's Jerry Crasnick contributed to this report.