Downie, 25, finished with two goals, 13 points and a plus-9 rating in 20 games with Colorado after being acquired from Tampa Bay on Feb. 21. Combined between the Lightning and Avalanche, Downie recorded 14 goals, 41 points and 137 penalty minutes in 75 games this past season. His 27 assists were a career high.
"Since his arrival, Steve has provided a unique combination of grit and skill to our lineup," Avalanche general manager Greg Sherman said. "We're looking forward to Steve's contributions to our team for the next two years."
The Newmarket, Ontario native tallied two goals and seven points in his first four games with the Avalanche, matching Theo Fleury in March of 1999 for the most points scored by a player in his first four games with the team. Downie had two three-point games as a member of the Avs, matching his career high.
A first-round selection of Philadelphia in the 2005 NHL Draft, Downie has collected 55 goals, 137 points and 654 penalty minutes in 272 career games. He scored 22 goals and 46 points for Tampa Bay during the 2009-10 season and helped the Lighting reach the 2011 Eastern Conference Finals by posting two goals and 14 points in 17 playoff games.