The deal was done Wednesday.
The Twins offered $1,065,000, and Casilla asked for $1,750,000. His salary was $865,000 last season. The Twins haven't gone to an arbitration hearing with a player since Kyle Lohse in 2006. Casilla was the Twins' last remaining unsigned arbitration-eligible player this year.
Casilla is in line to start, with veteran newcomer Jamey Carroll at shortstop. Casilla can play both middle infield positions.
The 27-year-old Casilla hurt his right hamstring and played in only one game last season after July 27. He batted .260 in 323 at-bats with 21 doubles, four triples, two home runs and 21 RBIs.