Blanco gets $1.25 million next year under Thursday's agreement, and the sides have a $1.25 million mutual option for 2013 with a $250,000 buyout.
Blanco declined a $1.15 million mutual option for 2012 on Tuesday, two days after the team exercised its end. By declining the option, he forfeited a $250,000 buyout.
He hit .250 with eight homers and 12 RBIs as Arizona's backup catcher last season. The 40-year-old from Venezuela served as a mentor for young All-Star catcher Miguel Montero and was a sturdy leader in the clubhouse for a team that won the NL West after consecutive 90-loss seasons.