The deal, announced Friday, begins in the 2019-2020 season and carries an average annual value of $1.25 million.
The 27-year-old DeSmith is 12-7-4 with a 2.47 goals-against average and a .924 save percentage for the Penguins. DeSmith began the season as the backup behind Matt Murray but played regularly during November and December while Murray dealt with a lower-body injury and inconsistent play.
General manager Jim Rutherford praised DeSmith for excelling under difficult circumstances. During a 12-start stretch from Nov. 21-Dec. 31, DeSmith went 8-3-1 to help the Penguins shake off a slow start to get back into the playoff picture in the crowded Metropolitan Division.
The signing also gives the Penguins stability in goal over the short term. Murray, a two-time Stanley Cup winner, is signed through the end of next season.