Holland, 29, has been the team's closer for the past two years, making the All-Star team each season. Last season, he had 46 saves, a 1.44 ERA and 90 strikeouts in 62.1 innings for the Royals.
During Kansas City's postseason run to the World Series last season, he had seven saves, a 0.82 ERA and 15 strikeouts in 11 innings.
Holland has spent his entire career with the organization since the Royals selected him in the 10th round of the 2007 draft.
The Royals had a rough offseason following a loss in the World Series to the San Francisco Giants. In addition to losing Nori Aoki and Billy Butler in free agency, ace James Shields signed a four-year deal with the San Diego Padres earlier this week.
The Royals' pitchers and catcher report to spring training on Tuesday in Surprise, Ariz. They open the regular season on Monday, April 6 against the Chicago White Sox.
- Paul Palladino