The contract will pay Kuroda $8 million in 2011, plus a $4 million signing bonus that will be paid out in 2012 and 2013, sources familiar with the negotiations told ESPN.com's Jayson Stark.
The deal was announced Monday after he took a physical in Los Angeles.
"We were interested in doing something maybe with an option for another year, but our appetite was one year as well," general manager Ned Colletti said. "It fit with what he was looking to do and it fit with what we were looking to do."
Kuroda had been considering a return to his native Japan, where he once starred for the Hiroshima Toyo Carp. But the 35-year-old right-hander decided to remain in the U.S., where he lives in the offseason with his wife and two children, for a fourth season in the major leagues
"I think he had a good experience here in L.A.," Colletti said. "I think he liked being a Dodger. I think his family liked the idea of coming back."
He had an 11-13 record with a 3.39 ERA in 196 1-3 innings and was healthy the entire season after injuries disrupted his first two years with the Dodgers. He had career highs in victories, innings pitched, ERA and strikeouts (159) last season.
Kuroda's career 3.60 ERA is the lowest among all Japanese starting pitchers in major league history.
He was coming off a $35.3 million, three-year deal that paid $13 million last season. He was the Opening Day starter in 2009.
Kuroda's return gives the Dodgers four established starting pitchers, along with Ted Lilly, who re-signed last month for $33 million over three years, Chad Billingsley and Clayton Kershaw. The other member of the rotation, Vicente Padilla, is a free agent.
Colletti said it was too soon to tell if the Dodgers would make any more major signings this offseason.
"We would still like to add pitching to [the roster]," he said. "There's a possibility [of signing a veteran fifth starter], but until we have it, we don't have it.
"That doesn't close the door on anybody, but I can't be specific on any free agents. But I'll just say that the Kuroda signing doesn't preclude us from trying to get better pitching."
Colletti hasn't closed the door on former manager Joe Torre returning to the Dodgers in some capacity, either.
"I talked to Joe probably three-four times since the end of the season," Colletti said. "He was in Hawaii for a while.
"I'm leaving that to Joe when he wants to approach me with what he wants to do and when he wants to do it."
Colletti also said he expects to announce the coaching staff in the next couple of days.
"We've got a pretty good feel for it, there's just some other details we've gotta tie up," he said.
Information from ESPNLosAngeles.com's Jon Weisman and The Associated Press contributed to this report.