The deal carries an average annual value of $1.5 million.
The 24-year-old was slated to become a restricted free agent with arbitration rights after signing a one-year extension worth $874,125 last fall.
Dermott struggled in his fourth campaign with the Maple Leafs, putting up a career-low six points in 51 games and alternated in and out of the lineup during the post-season.
The native of Newmarket, Ont., has recorded 47 points in 208 NHL games, notching a personal best of 17 across 64 games in his sophomore season in 2018-19.
Dermott was originally selected by the Maple Leafs in the second round (34th overall) of the 2015 NHL Draft.