The team announced the move Friday, shortly after the NHL's free-agency period opened. The 37-year-old returns to Long Island after helping New York reach the playoffs for the first time since 2007.
Nabakov had a 23-11-7 record, with three shutouts and a 2.5 goals-against average. His 23 wins were one off a group of three tied for the NHL lead. He's a 12-year NHL veteran, who completed his second season with New York. The Islanders were in need of goaltending help entering this off-season after buying out the contract of veteran Rick DiPietro.
The team also signed free-agent centre Peter Regin, who spent the past five seasons in Ottawa, to a one-year deal.