Financial terms were not released but the Detroit Free Press said the deal was worth $3.75 million, $2.25 million next season and $1.5 million in 2011-12.
Holmstrom, due to become a restricted free agent on July 1, is expected to sign the deal in a few days, the Red Wings said on their website (http://redwings.nhl.com).
He is the second veteran to re-sign with Detroit this week. Defenseman Nicklas Lidstrom signed a one-year deal on Tuesday.
Holmstrom, 37, has been on four Stanley Cup-winning teams since joining the Red Wings in 1996. The Swede scored 25 goals, including 13 on the power play, and had 45 points in 68 regular-season games in 2009-10.
(Reporting by Gene Cherry in Raleigh, North Carolina. Editing by Steve Ginsburg)