The Dodgers announced the extension Friday.
The deal will pay Kershaw $93 million, a source told ESPN, and includes incentives based on workload and performance. Kershaw reportedly will receive $4 million annually in bonuses based on starts, in four $1 million increments, as well as other incentives.
The extension replaces the two years and $65 million remaining on the seven-year, $215 million extension Kershaw signed in January 2014.
"Honestly, I wanted to stay here," Kershaw said. "Financial, everything aside, it was more valuable to me to stay here. I'm glad we got that done. I talked a lot with Ellen [his wife]. My kiddos love it here, Ellen loves it here, I love it here. I love the team here. There's not many opportunities that meet all the criteria that Ellen and I would be looking for.
"Myself, personally, a chance to win every single year, it doesn't come around like this in L.A. very often. We just decided that it was a much better option to try to work it out here than to do anything else."
Kershaw, 30, said staying with the Dodgers also allows him an opportunity to answer some of his critics, who have said he isn't as dominant as he used to be.
"It gives me a chance to prove a lot of people wrong," he said. "I think this year especially -- maybe rightfully so -- there's been a lot of people saying that I'm in decline or I'm not going to be as good as I once was. I'm looking forward to proving a lot of people wrong with that."
Kershaw originally faced a Wednesday deadline to opt out of his contract, but the two sides agreed to push it back to Friday afternoon. During a news conference Thursday, Dodgers president of baseball operations Andrew Friedman described negotiations as "ongoingly pleasant."
"There's been a lot of people saying that I'm in decline or I'm not going to be as good as I once was. I'm looking forward to proving a lot of people wrong with that." Clayton Kershaw
The new deal gives Kershaw a slightly smaller average annual value from what remained on his old contract ($31 million instead of $32.5 million) but tacks on an additional year and gives him the chance to earn more. The Dodgers, meanwhile, are able to retain their star pitcher without committing deep into Kershaw's 30s.
He will return to steer a rotation that already looks deep with Walker Buehler, Rich Hill, Alex Wood, Kenta Maeda, Ross Stripling and possibly Julio Urias. Starting pitcher Hyun-Jin Ryu was given a $17.9 million qualifying offer Friday, as was starting catcher Yasmani Grandal.
Kershaw has three Cy Young Awards and an MVP and has made seven trips to the All-Star Game through his first 11 seasons.
Few throughout history have been better, even in eras when pitching dominated the league. Only 13 pitchers have compiled at least 2,000 innings and sport a lower career ERA than Kershaw's 2.39. None of them pitched past 1927. Among the 30 after him in the all-time leaderboard, only one pitched past 1930.
But it's that regular-season prowess that has made his aggregate postseason performance seem so disappointing.
Kershaw has compiled a 4.32 ERA in 152 career postseason innings, a substantive sample size littered with maddening highs and lows. The differential between Kershaw's regular-season ERA and postseason ERA is the second highest among those with at least 50 postseason innings, trailing only former Boston Red Sox knuckleballer Tim Wakefield.
His final start was the Dodgers' last game of the 2018 season, when he gave up four runs in seven innings and was outdueled by David Price of the Red Sox in Game 5 of the World Series. Kershaw's fastball averaged only 90 mph on that Sunday night, a snapshot of the decline brought on by an exorbitant workload and three consecutive seasons with back injuries.
Asked about the potential of getting his velocity back, Kershaw said he's "not counting that out."
"It very well could," he said. "I have some ideas on maybe what I can do to improve on that, because there's a lot of guys who are older than me, there's a lot of guys with more innings in the big leagues, that are still maintaining their velocity. There's some things for me definitely to look into that. There's some things for me to work on in the offseason."
Kershaw still managed a 2.73 ERA and a 1.04 WHIP in 161⅓ regular-season innings in 2018, and he remains one of the most important members of the Dodgers.
Asked about Kershaw's value earlier this week, Friedman said: "He's made as much of an impact as you can on an organization in terms of the success we've had -- not just on the field, but from a culture standpoint, in terms of bringing up young pitchers and kind of emulating the work ethic, the drive."