Details of the deal were not immediately available, but the team confirmed the move to The Associated Press.
Mathis has been a key cog in the Colts' defense over the past nine seasons, teaming with Dwight Freeney to form one of the NFL's best pass-rushing tandems. Freeney is the Colts' career leader in sacks. Mathis is second at 83 1/2.
Both are expected to play prominent roles in the new defense brought in by first-year coach Chuck Pagano.
Mathis could have become an unrestricted free agent next week if the two sides had not worked out a new deal or if the Colts had not used the franchise tag on him.