Chung receives a $3 million signing bonus as part of the deal, while the Patriots create $925,000 in space, sources said.
The Patriots needed the space to sign their top draft choice, safety Kyle Dugger. The team had about $600,000 in cap space prior to the extension for Chung, who is entering his 12th NFL season.
Chung, 32, pairs with veteran Devin McCourty to form the Patriots' top safety tandem. Chung's ability to play closer to the line of scrimmage and match up with opposing tight ends provides flexibility that coach Bill Belichick values.
Chung has said in recent years that Belichick is the only coach he intends to play for, and the sides have annually adjusted his contract around this time of year.
In addition to the $3 million signing bonus, Chung will receive a $1.1 million base salary in 2020. He will also have the chance to earn $800,000 in per-game roster bonuses, as well as a $100,000 workout bonus.
If Chung decides to play beyond this season, the new deal has the same structure in 2021, 2022 and 2023 -- base salaries of $1.9 million each year, with the chance to earn $400,000 in per-game roster bonuses, $200,000 in incentives and a $100,000 workout bonus.