Farrior's agent, Ralph Cindrich, said Thursday the contract is meant to keep the 12-year veteran with the team until he retires.
The bulk of the contract is for the first three seasons, valued at $12.6 million, including $10 million in the first two years.
"That's the game plan, to finish out my career here," Farrior said. "The Steelers have been good to me, and I have put all my heart and soul into this, so I'll just try to close it out."
When the Steelers took two linebackers atop the 2007 draft, Farrior -- one of Pittsburgh's team leaders -- seemed a potential target for replacement. Farrior continued to play at a Pro Bowl level, however, and made sure those draft choices -- Lawrence Timmons and LaMarr Woodley -- fit into the defense.
"James has played at an extremely high level the entire time I have been here," second-year coach Mike Tomlin said. "Not only is he an outstanding player, he's also an outstanding professional and, of course, he's an outstanding leader for us."
Farrior, 33, was entering the final year of his Steelers contract and was scheduled to make $3.24 million.
A former first-round choice of the Jets, Farrior turned out to be one of the best free-agent signings in Steelers history. He had 562 tackles in 78 starts in his five years with the Steelers. In the past two years, the team let him rush the quarterback at little more, and he had 10½ sacks -- 6½ coming last year.
The Steelers believe Farrior can play at least three more seasons; they now have one of the deepest linebacking corps in football.
Information from ESPN.com senior NFL writer John Clayton and The Associated Press was used in this report.