The 32-year-old Lidle was 5-2 with a 3.90 ERA in 10 starts with the Phillies after he was acquired from Cincinnati in August. Lidle, who started the Reds' season opener, finished 12-12 overall with a 4.90 ERA.
His three shutouts were tied for the most in the major leagues and his five complete games were tied for second in the majors.
"Cory came over last August and did a very good job for us," Phillies general manager Ed Wade said. "He is capable of eating a lot of innings and taking the pressure off the rest of the staff. He fits in well with what we're trying to do, and getting him signed early allows us to concentrate on trying to improve in other areas."
Lidle will earn $3 million in 2005 and $3.3 million in 2006, plus performance bonuses. He came to the Phillies on Aug. 9 for right-hander Elizardo Ramirez, left-hander Joe Wilson and
outfielder Javon Moran.
"I knew Philadelphia was a place I really wanted to be," Lidle said. "I like what I see here and it's really something I want to be a part of. We have the talent to go all the way and I want to be part of it."
It's possible Milton and Millwood, both free agents, won't return. The Phillies have made an offer to Milton, who won 14 games
last season and earned $9 million. Millwood, who made $11 million and won nine games in an injury-plagued year, is unlikely to come back.
The Phillies, who finished a disappointing season 10 games behind first-place Atlanta, are trying to cut their payroll, which was $93.2 million at the start of the season.
Originally signed by Minnesota in 1990, Lidle is 57-51 with a 4.52 ERA in parts of seven seasons with the Mets (1997), Devil Rays (1999-2000), A's (2001-02), Blue Jays (2003), Reds and Phillies.
He became the first Phillies pitcher since Curt Schilling in 1992 to pitch back-to-back shutouts when he blanked the Brewers on Aug. 29 and the Mets on Sept. 4.
Lidle is 27-14 with a 3.48 ERA in 83 career starts from August through October, and has averaged 11 wins during the last four years.