Collins had Tommy John surgery on March 11 and missed Kansas City's run to a World Series championship last season. The 5-foot-7 lefty has spent his entire major league career with the Royals, going 12-17 with a 3.54 ERA in 228 appearances over four seasons. He has 220 strikeouts and 121 walks in 211 innings.
The 26-year-old Collins had been eligible for salary arbitration. He can earn a $50,000 bonus for making the All-Star team.
The terms of Collins' deal are the same as his 2015 contract.
Kansas City has seven players still eligible for arbitration: third baseman Mike Moustakas; outfielders Lorenzo Cain and Jarrod Dyson; pitchers Louis Coleman, Danny Duffy and Greg Holland; and catcher Drew Butera.