Malkin, 35, will earn $24.4 million over four years for an average annual value of $6.1 million.
"Evgeni is a generational talent who will be remembered as one of the greatest players in NHL history," Penguins general manager Ron Hextall said Tuesday night in a statement. "His hockey resume and individual accomplishments speak volumes about him as a player, and we are thrilled to watch him continue his remarkable legacy in Pittsburgh."
Malkin has spent all 16 years of his career with the Penguins. Along with center Sidney Crosby and defenseman Kris Letang, he was a core player who helped Pittsburgh win the Stanley Cup three times. Malkin won the Hart Trophy as NHL MVP in 2011-12 and the Conn Smythe Trophy as playoff MVP in 2009. He has 1,146 points in 981 games with Pittsburgh.
Malkin had 20 goals and 22 assists in 41 games for the Penguins this past season, and then six points in seven playoff games.
Hextall indicated at last week's NHL draft in Montreal that the Penguins wanted to bring back Malkin, who was an unrestricted free agent, and that they were "chipping away" at a new contract.
But while the Penguins signed fellow veteran free agent Letang to a new six-year contract last week, they were unable to find common ground with Malkin on a new deal. Their stalemate became increasingly public. There were multiple reports detailing Malkin's frustration with the team during the negotiation, while the Penguins pushed back on reports that they refused to add a fourth year onto Malkin's contract offer.
An NHL source told ESPN on Monday that Malkin was headed to the unrestricted free agent market, which opens at noon ET on Wednesday. Speculation ran through the NHL about where the star could end up -- including some who felt he could jump to the rival Washington Capitals to join friend Alex Ovechkin. But while Penguins team president Brian Burke confirmed Malkin was headed to market, he told the Pittsburgh Tribune-Review that there was still a chance Pittsburgh could bring the star center back on a new deal.
"The window is still open. But the timing is problematic," Burke said. "Once free agency opens, we have to commit to what we need to do to improve our hockey club. So the timing may not work. But certainly, there's no reaction on our part that, 'Oh, we don't want Evgeni back.' Or, 'This is horrible. What's he thinking?' None of that."
Malkin was originally drafted by Pittsburgh in the first round (second overall) in the 2004 NHL draft. With this contract, it's now possible he'll end his career with them, too.