Coach Brian Flores said the organization was "excited" to have reached the agreement but did not disclose details of the contract.
"In any negotiation, compromise is important," Flores said. "We want all sides to be happy. We feel like that's the case right now, and that's how we'll move forward.''
Howard's 2021 base salary of $12.785 million was fully guaranteed and a maximum of $3.5 million in incentives were added, sources confirmed to ESPN.
A core issue he had with his contract before it was restructured was that it was set to pay $12 million in nonguaranteed money in 2021, which had ranked 12th among NFL cornerbacks despite Howard's league-leading 10 interceptions in 2020.
The Dolphins also agreed to rescind $93,000 in fines Howard accrued from skipping the team's mandatory minicamp, the sources said.
The Dolphins also made adjustments to Howard's contact for the 2022 season, fully guaranteeing $6.775 million of his salary, the sources said. The remainder of his $12.975 million salary is guaranteed for injury and will be fully guaranteed on the first day of the league year. The Dolphins also converted $500,000 in per-game roster bonuses and a $100,000 workout bonus to his base salary.
Howard, 28, also received assurances that the Dolphins will renegotiate a new deal in the offseason in line with the market based on his health and his performance in the 2021 season, according to the sources.
Howard's agent, David Canter, thanked the Dolphins for "doing something unexpected and difficult to say the least.''
"Many times over the past eight months we all did not expect anything to happen,'' Canter said on Twitter. "The organization handled us with absolute class and professionalism.''
Howard became the NFL's highest-paid cornerback when he signed his five-year, $75.1 million extension in 2019 but has since fallen to sixth. He pointed out in an Instagram post that he is no longer the highest-paid cornerback on his own team, having been overtaken by Byron Jones, who signed a five-year, $82.5 million deal as an unrestricted free agent before the 2020 offseason.
Howard led the NFL with 10 interceptions and 20 passes defended last season en route to being named a first-team All-Pro. He has 22 interceptions and 55 passes defended since entering the league out of Baylor in 2016. Only the Baltimore Ravens' Marcus Peters (23) has more picks during that span.
"I was always happy to be here and be with the team that drafted me and sticking through it, ups and downs,'' Howard said Sunday.
The details of Howard's restructured contract were first reported by NFL Network.
The Associated Press contributed to this report.