TSN reported Saturday the deal is worth $6 million.
The deal will allow the 25-year old Semin to become an unrestricted free agent after the 2010-11 season. Semin was selected to the Russian Olympic team Thursday and is in his fifth NHL season.
He had an assist Saturday night in Washington's 4-1 victory over New Jersey and has 32 points in 29 games. The Russian has 248 career points (122 goals, 126 assists).
"I am extremely happy to sign here," Semin said through an interpreter after the game. "I like this team. I really like everything here."
Washington general manager George McPhee said the Capitals are happy to have Semin for at least another year because of the type of player he's becoming.
"This is a player we drafted and developed," McPhee said. "He's become a very, very good player and continues to improve. We discussed a number of options but this is the way he wanted to go for now."
The Capitals picked Semin 13th overall in the 2002 draft. He really broke through last season, scoring 79 points in 62 games.
"He's one of the elite players in the league and to have him is great," Washington coach Bruce Boudreau said.
Information from The Associated Press was used in this report.