Grossman wanted to stay with the Bears, and Bears general manager Jerry Angelo and coach Lovie Smith wanted to give him one more chance to stay as their starting quarterback. On Saturday, each side worked out a deal in order for the relationship to continue.
"It's still a great opportunity for him [in Chicago]," his agent, Eugene Parker, told ESPN.com.
Under terms of the deal, Grossman will have a $3 million base salary. He can make close to $2 million in incentives as long as he's the starting quarterback.
Several players on the Bears offense were pushing for Grossman to return as quarterback.
His best season was in 2006 when he started 16 games, passed for 3,193 yards, threw 23 touchdown passes and helped to take the Bears to the Super Bowl. He struggled in 2007 and started only seven games.
A first-round choice in the 2003 draft, Grossman has appeared in 32 games, with 30 starts, during his tenure with the Bears. The former Florida star has completed 489 of 900 passes for 5,907 yards, with 31 touchdown passes, 33 interceptions and an efficiency rating of 70.9.
It remains to be seen how the retention of Grossman affects Griese's future with the team. The 10-year veteran is due a $300,000 roster bonus early next month, and a base salary of $1.4 million for 2008, and there has been some speculation that Chicago will release him.
John Clayton is a senior NFL writer for ESPN.com. Senior NFL writer Len Pasquarelli and The Associated Press contributed to this report.