The Tigers did not announce terms of the deal but according to media reports, Verlander will remain under contract to Detroit through the 2019 season and could become MLB's first $200 million pitcher.
Verlander has two years remaining on his current five-year $79.5 million deal and combined with a new five-year $140 million extension that includes a club option for 2020 for another $22 million, he would become baseball's richest hurler.
He reportedly would make $28 million each season from 2015-2019.
The deal, which comes two days before the Major League season opens on Sunday, easily surpasses the seven-year, $175 million extension Felix Hernandez signed in February with the Seattle Mariners.
"Justin is one of the premier pitchers in baseball and we are thrilled to keep him in a Tigers uniform for many years to come," said Detroit president, chief executive and general manager Dave Dombrowski on the Tigers' website. "Justin has been a Tiger for his entire career and he is on pace to be one of the greatest pitchers in this illustrious franchise's history."
A five-time All-Star, Verlander has established himself as one of baseball's most dominant pitchers, claiming American League most valuable player and Cy Young Award honors in 2011.
Last season the 30-year-old right-hander went 17-8 with a 2.64 earned run average and 239 strikeouts in 33 starts in helping the Tigers to a World Series appearance against the San Francisco Giants.
His career record of 124-65 includes two no-hitters.
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