The Spurs announced the contract after agreeing to terms July 6 on a three-year, $22 million deal. The contract is only partly guaranteed for the final season.
Diaw was invaluable for the Spurs last season, averaging 9.1 points, 4.1 rebounds, 2.8 assists and 25 minutes while shooting more than 52 percent from the field.
He was one of the team's best players in the NBA Finals in June, when the Spurs beat the Miami Heat for the franchise's fifth championship.
Diaw's versatility on offense and his ability to defend multiple positions made him a key player on a team that advanced to the finals the last two seasons.