Ovechkin, who turned 27 on Monday, signed a deal that will keep him in Moscow until the current NHL lockout ends. He had 38 goals and 27 assists with the Capitals last season, his smallest point production since joining the team in 2005.
He has been named MVP twice and has 339 career goals in 553 games with the Capitals.
In addition, it was announced that CSKA Moscow had signed Detroit center Pavel Datsyuk.
Both of the Moscow teams involved in Wednesday's signings are part of Russia's Kontinental Hockey League.
The NHL announced Wednesday that all of the scheduled September exhibition games had been cancelled due to the lockout.
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