The 30-year-old Gagne, who has battled injuries over the last two seasons with the Los Angeles Dodgers, could earn another $5 million by hitting incentive targets.
Gagne, a right-hander, had 152 saves as the Dodgers' closer in 2002-2004 but pitched in only 16 games over the past two years after being slowed by elbow and back injuries.
Akinori Otsuka had 32 saves and a 2.11 ERA as the Rangers' closer last season but is expected to be the set-up man for Gagne this year.
MLB
Trachsel joins Orioles
15/02/2007 AT 06:50
Gagne won the Cy Young Award in 2003 as the National League's best pitcher when he converted all 55 save opportunities and had a 1.20 ERA in 77 games for the Dodgers.
During one stretch from 2002 through 2004, Gagne converted a major league-record 84 consecutive save opportunities.
MLB
Brewers sign Suppan in record deal
25/12/2006 AT 11:36
MLB
McCarthy joins White Sox
24/12/2006 AT 08:16