Last year with Montreal, Streit scored seven of his 13 goals and had 27 of his 49 assists on the power play.
"Mark was someone we targeted from the beginning and we're thrilled he's an Islander," Islanders general manager Garth Snow said in a statement. "Mark provides us with the stability on the blueline that we were looking for."
Streit has 25 goals and 84 assists in 205 career NHL games. Last season, Streit finished tied for 11th in the NHL in power play scoring and finished tied for second among defensemen.
The 30-year-old played eight seasons of professional hockey in Switzerland before coming to North America after he was drafted 262nd overall by Montreal in 2004.