The 30-year-old Pagan, who replaced mentor Carlos Beltran in center field while with New York, is a switch-hitter with speed. He batted .262 with seven home runs and 56 RBIs last season, down from .290 with 11 homers and 69 RBIs in 2010.
Beltran moved to right field for the Mets in spring training before he was traded to the Giants in late July. After an injury-plagued stint in the Bay Area that saw the 2010 World Series champions miss the playoffs, Beltran departed to the St. Louis Cardinals on a two-year contract.
Pagan's deal includes $150,000 in available performance bonuses: $50,000 each for 550, 600 and 650 plate appearances.
On Tuesday, Giants ace Tim Lincecum is poised to ask for a record salary in arbitration when the sides exchange figures for one-year non-guaranteed contracts.
The two-time NL Cy Young Award winner is expected to top the $22 million figure submitted by Houston pitcher Roger Clemens in 2005 after he became a free agent and accepted arbitration.
Lincecum, the winning pitcher in the Game 5 World Series clincher at Texas in 2010, earned $13.1 million last season and completed a two-year deal worth $23.2 million.