The free-agent right-hander, 31, posted a 4-3 record in 11 starts with Washington last season in his return to the major leagues after missing over two seasons with a shoulder injury.
Financial terms of the contract were not disclosed but Washington media said the was worth $4 million.
"I was very pleased with his progress and overall production last year and am anxious to see what he can do with a completely healthy offseason," Nationals General Manager Mike Rizzo said in a statement.
Wang spent five years with the New York Yankees, posting back-to-back 19-win seasons in 2006-07, before undergoing shoulder surgery in 2009.
He signed with the Nationals in 2010 but did not make his major league return until the 2011 season.
"I am appreciative of the opportunity and all the support the Nationals gave me to make the comeback," said Wang, who has a 59-29 big league record.
(Reporting by Gene Cherry in Salvo, North Carolina; Editing by Frank Pingue)