The Detroit Pistons didn't stop at making over their backcourt Monday.
The new contract is worth $34 million, with the first two years guaranteed. The third year is only a partial guarantee, the source told Ford.
Hamilton, who led Detroit with 19 points Monday night in the Pistons' 101-83 victory at Charlotte, declined to speak to reporters after the game.
"We definitely wanted Rip in the fold as we continue to make this run," coach Michael Curry said. "He's a valuable piece to this puzzle."
"We just felt it was the right time to change our team," Pistons president of basketball operations Joe Dumars told The Associated Press. "Iverson gives us a dimension that we haven't had here and we really think it's going to help us."
Hamilton's current $62 million, seven-year contract was signed five years ago.
The three-time All-Star helped the Pistons win the 2004 NBA title and advance to the Eastern Conference finals last season for the sixth straight year.
Washington drafted the shooting guard No. 7 overall in 1999 after the junior led Connecticut to a national title, earning most outstanding player of the Final Four honors.
The Wizards traded him to Detroit three years later for Jerry Stackhouse.
Hamilton has averaged nearly 18 points in the regular season and has increased his scoring to nearly 21 points per game in the postseason.
Hamilton broke Isiah Thomas' franchise record for playoff scoring last season and finished with 2,414 points and played in his 116th postseason game, surpassing Bill Laimbeer's team mark. He has scored at least 20 points in 58 playoff games since 2003, giving him a two-game lead over San Antonio's Tim Duncan in that category and a double-digit lead over any other superstar, according to STATS.
The player known as Rip has an edge against opponents because he can run tirelessly around screens, curling open for midrange shots. He has improved his overall game with the Pistons, playing stronger defense, making better passes and connecting on more 3-point shots.
Chad Ford covers the NBA and NBA Draft for ESPN Insider. Information from The Associated Press was used in this report.