The contract was not announced, but it was confirmed to The Associated Press by a Celtics official familiar with the deal who spoke on the condition of anonymity because the free agent signing period does not begin until Thursday.
"Both sides made it clear that staying together was best for the team," the official said.
Terms of the contract were not immediately available. The Boston Herald, which first reported on the deal, says Pierce would get $61 million over four years, with a mutual option for the fourth year.
Celtics spokesman Jeff Twiss had no comment. Pierce's agent, Jeff Schwartz, did not immediately respond to a call seeking comment.
Pierce has spent his entire 12-year career with the Celtics and is second only to Larry Bird among longtime Celtics in points per game. Pierce is also first in franchise history in 3-pointers, second in steals, third in total points, eighth in games played and ninth in rebounds.
Pierce opted out of the final year of a contract that was to pay him $21.51 million next season. By re-signing quickly for less, he creates cap room, gets long-term security for himself and gives the team a chance to keep together the core of the 2008 champions for another run in 2010-11.
With Kevin Garnett under contract for two more years, that would preserve the new Big Three that led the Celtics to an NBA-record 17th championship two years ago. Garnett missed the 2009 playoffs with a knee injury; the Celtics returned to the NBA finals this spring before losing to the Los Angeles Lakers in seven games.
Pierce, 32, was the 10th overall pick in the 1998 draft from Kansas. He is the last remnant of the ill-fated Rick Pitino era, and his tenure stretches through two trips through the NBA lottery as the once-dynastic franchise tried to restore its former glory.
In 2007, after going 24-58 to earn the fifth overall pick in the draft, the Celtics considered trading Pierce and trying to rebuild with youth. Instead, they acquired Garnett and Allen and won the NBA title in their first year.
For Pierce, it meant giving up his role as a go-to guy who had averaged as many as 26.8 points per game. His numbers dropped -- he averaged 19.5 points over the past three years -- but the Celtics reached the NBA finals twice in three years.
Pierce has 19,899 points in 884 games, all for the Celtics.