"We wanted Antti to remain a San Jose Shark and he wanted to be here," Sharks general manager Doug Wilson said in a statement. "Once he got through his expected integration period with our club, Antti's play has been outstanding and, just as important, he has consistently been a great teammate. And like many of his teammates over this past year, he worked with us on a contract that fits within our team structure and enables us to keep our group intact."
Niemi, who helped lead the Chicago Blackhawks to the Stanley Cup title last season, is 23-15-3 with a 2.44 goals-against average and .919 save percentage.
After a four-game losing streak in January, Niemi has won 15 of his past 18 games to help the Sharks rise to No. 3 in the Western Conference.
After letting longtime starter Evgeni Nabokov leave as a free agent after last season, the Sharks originally decided to go with Antero Niittymaki and Thomas Greiss this season after signing Niittymaki to a $4 million, two-year deal.
But Niemi, 27, became available when he won a $2.75 million salary in arbitration, and the Blackhawks decided to cut him because of salary-cap concerns. San Jose signed him to a $2 million contract in early September and teamed him with Niittymaki.
Niemi won just one of his first five starts and had a 3.93 GAA at the end of November. But he has picked up his play considerably since and has been a major reason for San Jose's resurgence in recent weeks.
With Niittymaki injured, Niemi has started the past 18 games, going 15-2-1 with a 1.91 GAA and .934 save percentage.
"He's been huge in this run of games," forward Patrick Marleau said. "He's been back there stopping all those key shots, making the hard saves look easy and making timely saves. He's been huge for us back there. He looks like he's having fun back there and playing well. We just have to keep playing well in front of him."
Niemi had played only 42 NHL games before leading the Blackhawks last season to their first championship since 1961. He went 16-6 with a 2.63 GAA in the playoffs, allowing only seven goals in the four-game sweep of the Sharks.
"Nemo has been very good for us," coach Todd McLellan said. "He's there as a steadying influence now. Our guys really believe in him. They feel comfortable when he's in goal. Should we make mistakes, he's there to cover up for us. On the other side, I think he feels comfortable. He knows we're able to get him a little run support and that everyone is working had for him. Right now it's a powerful thing."
Jesse Rogers covers the Blackhawks for ESPNChicago.com and ESPN 1000. Information from The Associated Press was used in this report.