The deal is worth $15 million, including $10 million fully guaranteed at signing, and it could grow to $17 million, a source told ESPN NFL Insider Adam Schefter.
It is the highest guarantee ever given to a pass-rusher more than 33 years old. As part of the five-year, $33 million contract he signed in 2012, Wake was slated to make $8.275 million in 2016.
Wake played in just seven games last season before tearing his Achilles tendon in a loss to the Patriots. He totaled seven sacks and four forced fumbles prior to being injured.
The Dolphins posted on Twitter a video of Wake signing his new deal.
"Hey, what's up Dolphins fans? It's your boy Cameron Wake here," he said. "I just finished some business up. You've got me for two more years. I'm really excited about what's on the horizon for myself and the Dolphins and the whole family. I'm really excited to be a big part of this team to go out there and make sure we win a lot of games for you guys. We appreciate the support. Keep it up, and we will do the same."
Wake, a four-time Pro Bowl selection, joined the Dolphins in 2009 after playing two seasons in the Canadian Football League. In his seven seasons with Miami, Wake has played in 100 games and recorded 247 tackles and 70 sacks.
"We are pleased that we were able to reach an extension with Cam," said Mike Tannenbaum, the Dolphins' executive vice president of football operations. "He sets the right example both on and off the field, working his way up from an undrafted college free agent to a four-time Pro Bowl selection. We are excited how he will fit in this new defense and continue to be a key contributor."