Financial terms were not disclosed. The Raptors had until Friday to exercise their option on the 23-year-old. Bargnani, who is from Italy, was the first European-born player to be selected with the top pick in the draft. He is now under contract through the 2009-10 season.
Bargnani was named to the league's all-rookie first team and finished as runner-up to Portland's Brandon Roy in rookie of the year voting in 2006-07, when he averaged 11.6 points and 3.9 rebounds in 65 games. He averaged 10.2 points and 3.7 rebounds last season.