Verlander's deal, which would make him the highest-paid pitcher in the game, is for seven years and worth $180 million, sources said. A vesting option for an eighth year could push the deal to $202 million.
"I love this city & the fans -- couldn't be more excited to spend my career here! We're going to bring a World Series to Detroit!!!" Verlander tweeted.
Verlander, who would have been eligible to become a free agent after the 2014 season, had recently said he wouldn't discuss a new contract if a deal didn't get done by the end of spring training.
The right-hander was set to make $20 million over each of the next two seasons. The new deal keeps those salaries and adds $140 million in guaranteed money: $28 million each season from 2015-19. It includes a $22 million option for 2020 that would become guaranteed if he finishes among the top five in 2019 Cy Young voting.
Verlander, 30, has been baseball's most dominant pitcher over the last four seasons, leading the league in innings and strikeouts three times, wins twice and ERA once.
Verlander went 24-5 with a 2.40 ERA and 250 strikeouts in 2011, when he won both the Cy Young Award and MVP, becoming the first starting pitcher to sweep those awards since Boston's Roger Clemens in 1986.
"Justin is one of the premier pitchers in baseball and we are thrilled to keep him in a Tigers uniform for many years to come," Tigers general manager Dave Dombrowski said. "Justin has been a Tiger for his entire career and he is on pace to be one of the greatest pitchers in this illustrious franchise's history."
Last season, Verlander went 17-8 with a 2.64 ERA, finishing second in Cy Young voting to David Price of the Tampa Bay Rays. With Verlander as their anchor, the Tigers reached the World Series last season for the second time since 2006.
The Rookie of the Year in 2006 and a five-time All-Star, Verlander is 124-65 with a 3.40 ERA in eight major league seasons with two no-hitters.
With Verlander off the market, the Dodgers' Clayton Kershaw becomes the most attractive pitcher eligible for free agency after the 2014 season. Price is eligible after the 2015 season.
Buster Olney covers Major League Baseball for ESPN The Magazine. Information from The Associated Press was used in this report.