The deal is worth $3.5 million per year, sources told ESPN.com Tuesday morning.
Re-signing the 22-year-old Letang -- who was scheduled to become a restricted free agent -- was a priority for Pittsburgh because defenseman Sergei Gonchar's contract is running out after this season.
Letang has three goals and 24 assists in 67 games this season.
Letang scored the winner in overtime against Washington in Game 3 of the Eastern Conference semifinals last season, helping the Penguins win the series in seven games.
Information from ESPN.com's Scott Burnside and The Associated Press was used in this report.