The Rockets were not allowed to give Nene a fourth year on the deal because his 38th birthday would extend past his fourth year, which would violate the Over 38 rule.
A source said the deal was done using Nene's non-Bird rights owned by Houston, preserving the Rockets' biannual and midlevel exceptions.
Nene, 34, served as a valuable reserve center for the Rockets after signing for the cap-room exception last season. He averaged 9.1 points and 4.2 rebounds in 17.9 minutes per game, shooting a career-best 61.7 percent from the floor.
Nene's numbers improved in the playoffs (10.0 PPG, 4.7 RPG, 70.6 FG%), but his postseason ended prematurely due to a torn left adductor suffered during Game 4 of the Western Conference semifinals against the San Antonio Spurs. The injury did not require surgery.
Nene has averaged 12.0 points and 6.3 rebounds per game during his 15-year career with the Denver Nuggets, Washington Wizards and Rockets. He has struggled with injuries throughout his career, as his 67 games played last regular season matched his most since 2010-11.