The 26-year-old forward, who was a restricted free agent, avoided a salary arbitration hearing scheduled for Aug. 21.
Erne scored an NHL career-high 11 goals in 45 games with the Red Wings last season. His 20 points tied an NHL best set in 2018-19.
A second-round pick (No. 33) by the Tampa Bay Lightning in the 2013 NHL Draft, Erne has scored 52 points (26 goals, 26 assists) in 215 regular-season games for the Lightning and Red Wings and is scoreless in three Stanley Cup Playoff games.
The Red Wings also avoided salary arbitration with forward Jakub Vrana, who
agreed to a three-year contract
Aug. 10.