No terms were disclosed but the Big East Conference school said in a release that financial details of the agreement will be announced next week.
The Charleston (W.Va.) Gazette reported the contract includes a buyout if Huggins terminates the deal, similar to the $4 million buyout of former football coach Rich Rodriguez, who left Morgantown this year to fill the vacancy at Michigan.
"It was the university's idea," Huggins told the newspaper. "I think a lot of times people will let contracts run out. I think good employees are happy employees."
The 54-year-old Huggins left Kansas State after just one season in April 2007 to return to WVU, his alma mater.
In the 2007-08 season, the Mountaineers compiled a 26-11 record and reached the NCAA Tournament's West Regional final.
Huggins became the 29th Division I coach to reach 600 career victories.
He resigned in August 2005 as head coach at the University of Cincinnati after receiving an ultimatum from the university to resign or be fired.
Huggins had previously pleaded no contest to drunken driving charges.