Gaustad, who will make $675,000 next season, received a slight raise over the $450,000 contract he made as an NHL rookie last season. Gaustad was scheduled to have his arbitration hearing Wednesday.
A rugged center who split time on the Sabres third and fourth lines last season, Gaustad finished with nine goals and 15 assists in 78 games. He added four assists in 18 playoff games in helping the Sabres reach the Eastern Conference finals, which they lost in Game 7 to eventual Stanley Cup champion Carolina.
Gaustad's agent, Carlos Sosa, said the Sabres prompted the deal by opening talks late last week. Sosa added that Gaustad was seeking a two-year deal because it leaves him eligible for one more year of arbitration in 2008.
Buffalo selected Gaustad in the seventh round of the 2000 draft after he showed signs of promise following his rookie season in junior hockey with Portland of the Western Hockey League. He spent the next five years developing his skating ability to earn a spot on the Sabres season-opening roster last year.
Buffalo still has three players scheduled for arbitration hearings, starting with forward J.P. Dumont on Monday.
The group also includes Maxim Afinogenov, whose hearing is scheduled for Thursday. Afinogenov is expected to command a hefty raise over his $1.08 million contract after leading the team with 73 points last season.