Phillips, who has spent his entire 16-year career with the Senators, was scheduled to become a free agent after this season and had been projected as a possible candidate to get traded prior to Wednesday's 3 p.m. ET deadline.
The 35-year-old Phillips has one goal and 12 assists in 52 games this season.
A two-time All-Star, Phillips has 71 goals and 212 assists in 1,125 career games with the Senators.
ESPN.com's Pierre LeBrun contributed to this report.