Financial terms were not disclosed.
"We are all very pleased to have Steve back in the fold for one more year," said General Manager Ken Holland. "He brings a great deal of dedication, skill, and leadership abilities to our hockey club and I feel his competitive nature will greatly help this team remain successful through the upcoming season."
Yzerman, 38, has spent his entire 20-year NHL career with the Red Wings. He earned $8.5 million in 2002-03, and missed most of the first five months last season while recovering from right knee surgery.
He finished with two goals and six assists in 16 games, but was awarded the Bill Masterton Memorial Trophy for qualities of perseverance, sportsmanship, and dedication to hockey following the season.
Yzerman, a nine-time All-Star, has amassed 660 goals and 1,670 points in 1,378 games. He won the Conn Smythe Trophy as playoff MVP in 1998, and helped the Red Wings win three Stanley Cup titles.
Celebrity Families of 2014 [PHOTOS]