The 34-year old will make $3 million this year and $4 million in 2019, and he can earn up to $1.1 million each season in in performance bonuses based on plate appearances.
With Bryce Harper, Adam Eaton and Michael A. Taylor the favourites to earn the starting spots in the outfield and Victor Robles another possibility, Kendrick likely will be a bench option for first-year manager Dave Martinez.
Kendrick hit .293 with seven home runs and RBIs in 52 games with Washington after he was acquired from Philadelphia. In 12 major league seasons with the Los Angeles Angels, Dodgers, Phillies and Nationals, the versatile right-handed hitter has batted .291 with a .755 OPS.
Washington agreed to the deal earlier this week, pending a successful physical.