The 36-year-old Ibanez, who takes over in left field from Pat Burrell, batted .293 last season for Seattle with 43 doubles, 23 homers and 110 RBIs.
A left-handed hitter, Ibanez batted .305 against lefty pitchers last season and .288 against righties.
He was selected by the Mariners in the 36th round of the 1992 amateur draft and was signed by the Kansas City Royals as a free agent before the 2001 season. He returned to the Mariners in 2004.
Ibanez drove in 100 or more runs during each of the last three seasons in Seattle.
His agreement was first reported by ESPN.com.
AP Baseball Writer Ronald Blum in New York contributed to this report.