The team announced the deal Friday night.
Iwakuma signed with the Mariners last January. The Japanese right-hander began the season in the bullpen before transitioning into the starting rotation in July, and he thrived in a familiar role.
Iwakuma started 16 games for Seattle and went 8-4 with a 2.65 ERA over the final three months of the season. He was 6-2 with a 1.83 ERA and 43 strikeouts over his last nine starts.
For the season, Iwakuma finished 9-5 with a 3.16 ERA and 101 strikeouts in 125 1/3 innings.