The team announced the deal on its official website.
Gagner, 22, suffered through inconsistencies last season and amassed 18 goals and 47 points in 75 games but had a breakthrough eight-point night (four goals, four assists) in a February tilt against the Chicago Blackhawks.
The London, Ont. native has 77 goals and 143 assists in 366 career regular season games for the Oilers.
Drafted sixth overall by the Oilers in 2007, Gagner's career high is 49 points (13 goals, 36 assists) in the 2007-08 season. He's coming off a two-year pact with an annual salary cap hit of $2.275 million.