Parra, 29, didn't pitch in the Major Leagues last season because of back and elbow injuries and had surgery in late August to remove a spur from his elbow.
The new deal was concluded Thursday.
Parra made $1.2 million last season after he became eligible for arbitration for the first time, and a source told mlb.com he would make the same salary in 2012.
Parra was 3-10 with a 5.02 earned run average in 42 games (16 starts) in 2010. But he fared better after moving to the bullpen, posting a 2.39 ERA.
Brewers center fielder Carlos Gomez and catcher George Kottaras also avoided arbitration, the Milwaukee Journal Sentinel reported.