Cole will make $2.8 million this upcoming season and $3 million in 2010-11.
The Hurricanes' third-round pick in 1998 took a pay cut to stay in Raleigh. He made $4 million last season while completing a three-year deal he signed in 2006.
Carolina dealt Cole to Edmonton last summer, then reacquired the fan favorite at the trade deadline. His return re-energized the Hurricanes -- and All-Star Eric Staal in particular -- down the stretch, with points in 15 of the final 17 games in the regular season. He struggled in the playoffs with no goals and five assists in 18 games.
Cole had 18 goals and 24 assists in 80 regular-season games.
"Erik clearly had an instant impact on our team when he returned to Carolina," general manager Jim Rutherford said. "He has been an important piece for our franchise for a long time, and we are pleased that he has decided to remain at home in Raleigh."
Cole became the second of Carolina's potential free agents to re-sign this week. Playoff hero Jussi Jokinen previously signed on for two more years.
UNIONDALE, N.Y. (AP) -- If Rick DiPietro gets hurt again, the New York Islanders now have a veteran goalie to back him up.
The Islanders signed Dwayne Roloson to a two-year, $5 million contract on Wednesday, luring him away from the Edmonton Oilers, who refused to go beyond one year for the 39-year-old netminder.
"We are thrilled to add Dwayne to our lineup," Islanders general manager Garth Snow said in a statement on the first day of the NHL free-agent season. "He is a proven winner having led the Edmonton Oilers to the Stanley Cup finals in 2006 and we look forward to him bringing his veteran leadership to the Islanders."
DiPietro, three seasons into a landmark 15-year-deal with the Islanders, was limited to five games last season due to a knee injury. His status for the upcoming season is unknown.
Roloson played in 63 games for the Oilers last season, going 28-24-9 with a 2.77 goals-against average. He went 12-5 in the 2006 playoffs during Edmonton's run to the finals.
In 462 career NHL games with Calgary, Buffalo, Minnesota and Edmonton, Roloson has 167 wins and 23 shutouts.