The seven-time National League Most Valuable Player has 734 home runs and is in second-place on the all-time home run list, 22 homers behind Henry Aaron.
Club sources told the San Francisco Chronicle the team had second thoughts about resigning the 42-year-old left fielder because of his links to the BALCO steroids cases but in the end decided that Bonds' suggestion his failed amphetamine test last year was because of a substance taken from a teammate's locker would not hurt the team.
"I'm very excited, very happy that we got it done," Bonds told reporters Monday night. Bonds passed a physical on Monday.
The deal, however, banishes Bonds' two personal trainers from the clubhouse, trainers' room, dugout and the field, the newspaper said.
Bonds hit .270 with 26 home runs and 77 RBI in 144 games in 2006. The Giants (76-85) finished in third place in the N.L. Western Division.