The 29-year-old defenseman scored 14 points (one goal, 13 assists) in 69 games with the Capitals and San Jose Sharks this season. He did not score in 10 games after he was traded to Washington on Feb. 18. Dillon had one assist in eight postseason games.
"I wanted to stay here," Dillon said. "I wanted to commit to being here. I know from the city to the fan base to just talking to players on the team that have been here for a few years that the Caps are well-represented. It's very fortunate to have the fan base and everyone that we do in Washington. I know there's a reason why it's fun to be a Cap, and it's great to be and I'm excited to be."
Dillon said talking with coach Peter Laviolette, who was hired Sept. 15 to replace Todd Reirden, was a factor in staying with the Capitals.
"I think with the physical brand of hockey that I bring, I do like to use my feet and join the rush or complement those offensively skilled [defensemen]," Dillon said. "I think for the fit, when it comes to the style of play, the conversation that I had with coach Laviolette over the last couple weeks was just ... coming from [the Nashville Predators], I got to play them a lot when I was out that way. He encourages defensemen to be involved in the rush, to play aggressively."
Signed by the Dallas Stars as an undrafted free agent March 1, 2011, Dillon has scored 114 points (22 goals, 92 assists) in 598 regular-season games with the Capitals, Sharks and Stars, and has 10 assists in 70 Stanley Cup Playoff games.
