The deal makes shortstop Ryan Theriot the lone Cub left in the arbitration process.
The Cubs have not gone to an arbitration hearing since 1993 with first baseman Mark Grace.
Marmol, 27, made $575,000 in 2009, but had sought $2.5 million.
The Cubs were offering $1.75 million.
Last season, Marmol, primarily a middle reliever, went 11-for-11 in save chances when he assumed the closer's role in mid-August, replacing Kevin Gregg.
His lone weakness was 65 walks in 74 innings.
He compiled 93 strikeouts and finished with a 2-4 record.
The 2007 all-star has a 14-16 career record with 3.42 ERA, 200 walks and 362 strikeouts in 307 2/3 innings.