The deal guarantees the 36-year-old Saito $1 million with another possible $300,000 in incentive bonuses based on games finished.
Los Angeles could have renewed his salary for as low as $400,000.
"It's a unique situation, and you can tell by the salary that we treated it that way," said Dodgers vice president Kim Ng, who handled negotiations for the club.
Trachsel joins Orioles
"He was a pretty integral part of the club, especially in the second half, and he was rewarded for that."
A four-times All-Star in Japan, Saito was 6-2 with a 2.07 ERA last season. He blew only two save opportunities and struck out 107 batters in 78 1/3 innings.
Saito's signing was key because the future of the Dodgers' regular closer, free agent Eric Gagne, is in doubt after elbow and back operations.
Brewers sign Suppan in record deal
McCarthy joins White Sox