The new deal gives the team a cushion for its salary cap this season and clears more than $2 million in cap space. The money saved likely will make it easier for the Redskins to negotiate new deals for two key members of their offense -- Pro Bowl running back Stephen Davis and tackle Jon Jansen, both pending free agents.
Washington also save nearly $3.6 million against the cap in 2003, and Smith, 40, will take a $750,000 pay cut this year, according to the Washington Times.
"He is energized and anxious to be a part of the team for at least the next couple of years," Smith's agent, Leigh Steinberg, told the Times. "He willingly facilitated the team's attempt to create the strongest possible roster. At this point, winning is paramount."
Smith did get a $2 million signing bonus, and agreed to reduce his income for the 2002 season by $750,000, from $3.5 million to $2.75 million.
"He has a great affinity for (Redskins owner) Dan Snyder and a real belief in Dan's commitment to winning," Steinberg said.
The 6-4, 265-pounder, who had two offseason knee procedures, said he's physically fit and ready to play.
"Physically, I'm very comfortable with where I am in the scheme of things," Smith said. "I feel great."
In 17 pro seasons, the Norfolk, Va., native has started all but four of his 247 games, has 855 solo tackles (1,154 overall), 43 fumble recoveries, and 186 sacks.
The former Virginia Tech All-American was a first-round draft pick by the Buffalo Bills in 1985. He played his first 15 pro seasons with the Bills and was an AFC Pro Bowl choice 11 times.