Phillips will make $2.25 million per year. Phillips was scheduled to become an unrestricted free agent at the end of the season and was subject of discussion approaching the NHL Trade Deadline.
"I'm very excited about it," Phillips told the Senators website. "It's been going on for a little while as far as the talks. With the uncertainty of this day, if nothing happened what the alternatives were, that weighs on you. I'm very excited to get something done."
Phillips, 35, was the No. 1 pick in the 1996 NHL Draft by the Senators. He has one goal and 13 points in 52 games this season, his 16th in the League.
"Really, the last 24 hours there wasn't a lot going on until I got a call about quarter-to-10 this morning to go to Bryan Murray's office and get that done," Phillips said. "The multiyear (term) was a big part for me and to also do it in Ottawa. I've been there my whole career. I believe we're on the way up. I'd love nothing more than to be a part of bringing a championship to Ottawa."
"Right now, our goal is to make a push to make it to the playoffs where anything can happen," Phillips said. "The guys in the room have confidence we can do that. It's not going to be easy but knowing that the management organization has that same feeling, to add [Ales Hemsky] to add that push makes everyone feel better."