The 25-year-old forward, who was a restricted free agent, avoided a salary arbitration hearing scheduled for Wednesday.
"Obviously, it was kind of a process, but I'm happy it works for both sides," Vrana said. "I'm happy that it's over with and I can move forward for preparing for the season."
Vrana scored 36 points (19 goals, 17 assists) in 50 games for the Red Wings and Washington Capitals last season, including 11 points (eight goals, three assists) in 11 games after he was traded to Detroit on April 12 for forward Anthony Mantha.
Vrana scored four goals in a 7-3 win against the Dallas Stars on April 22, his fourth game with the Red Wings.
"The opportunity to play for the Red Wings is a lot different than in Washington," he said. "I get more ice time. My role has changed a little bit, and I'm looking forward just to prove what I can do and show my potential. ... When you go through something like that (trade), you don't really know what to expect. Everything went kind of quick, and since Day One, everyone really kind and helped me to fit in. I just went there and finished the season and tried to show what I can do, and obviously this team has a great potential and a bright future. Like I said before, I'm really happy to join this group."
Selected by Washington in the first round (No. 13) of the 2014 NHL Draft, Vrana has scored 168 points (84 goals, 84 assists) in 295 regular-season games with the Red Wings and Capitals and eight points (three goals, five assists) in 38 Stanley Cup Playoff games. He won the Stanley Cup with the Capitals in 2018.
Forward Adam Erne, who is a restricted free agent, has a salary arbitration hearing scheduled for Aug. 21.
Forward Tyler Bertuzzi who was a restricted free agent, signed a two-year contract with the Red Wings on July 31. Financial terms were not disclosed.
Detroit (19-27-10) finished tied for last in the eight-team Discover Central Division last season. The Red Wings have not qualified for the playoffs the past five years since making it 25 straight seasons.
"I know it's a rich organization with a great history," Vrana said. "They have been doing really good for such a long time. I'm really happy to join them. Things are where they are right now, but I'm looking forward to build something."
NHL.com columnist Nicholas J. Cotsonika contributed to this report
