Gagne will make US$7 million under the deal reached Saturday.
Gagne is a seven-time 20-goal scorer who spent his first 10 NHL seasons with Philadelphia, scoring a career-high 47 goals during the 2005-06 season. The Flyers traded him last summer to Tampa Bay, and Gagne had 17 goals and 23 assists before the Lightning's run to the Eastern Conference finals.
The two-time Canadian Olympian has struggled with injuries in recent seasons, sitting out with several concussions, a serious groin injury and a neck injury.
The Kings quickly signed Gagne after failing to land Brad Richards, who agreed to a nine-year deal with the New York Rangers.