The 32-year-old will count $5.375 million against the salary cap over the next two seasons. Green is taking a pay cut from his previous $6 million salary to stay with the team.
Green put up eight goals and 25 assists for 33 points in 66 games before his season was cut short by a neck injury.
Seven of Green’s eight goals came on the power play, where he’s a stabilizing force for Detroit. He twice a runner-up for the Norris Trophy as the NHL’s top defenseman during his time with the Capitals.
The Associated Press contributed to this report.