The deal, which runs through the 2011 season, is for roughly $25 million and rewrites the final year the 31-year-old Smith's current contract, under which he was due a $1 million roster bonus and a salary of $3.5 million.
The new deal is worth about $12 million between now and next season, including a signing bonus.
"The motivating force behind doing the deal on behalf of Aaron and for Aaron was his overwhelming desire to play his entire career as a Pittsburgh Steeler, as well as his gratitude to the organization and the fans of Pittsburgh for the chance to wear the black and gold," Smith's agent, Peter Schaffer, said Wednesday.
The deal is expected to give the Steelers more room under the salary cap, though the specific implications were not immediately clear. Smith's previous contract, including a prorated share of his former signing bonus, would have counted more than $7 million toward the salary cap next season.
Smith has played in 118 games for the Steelers, and started 110, since the team drafted him in the fourth round in 1999 out of Northern Colorado.
He was named to the 2005 Pro Bowl after finishing the 2004 season with a career-high eight sacks.
Smith has been with the Steelers longer than any other players except offensive guard Alan Faneca, cornerback Deshea Townsend and wide receiver Hines Ward.
The NFL's free agent signing period begins Friday.