The deal makes Tibbetts the highest-paid coach in WNBA history, sources said.
Tibbetts is a respected longtime coach in the NBA, including assistant stops with Portland and Cleveland over the past decade before joining Jamahl Mosley's staff as top assistant two years ago.
Tibbetts' hiring is another significant hire for the Mercury after owner Mat Ishbia lured Nick U'Ren from the Golden State Warriors to become general manager. Ishbia tasked U'Ren and CEO Josh Bartelstein with the coaching search that lands Tibbetts with the Mercury now.
Phoenix recently announced plans to build a modern, dedicated practice facility as part of a new $100 million investment. The Mercury finished with the WNBA's worst record this season at 9-31.