The Lightning did not release financial details but multiple reports said the average annual salary cap hit will be $5.83 million US.
"He's proven to be a fierce competitor and outstanding leader who fits very well with our team," Tampa Bay general manager Steve Yzerman said in a statement.
Callahan, 28, was acquired by Tampa Bay on March 5 in a deal that saw longtime Lightning forward St. Louis head to the Rangers.
Callahan went on to record six goals and five assists in 20 games for Tampa Bay. For his career, the right wing notched 138 goals and 127 assists in 470 career regular-season games.
One of the game's better two-way forwards, he's amassed 27 power-play goals and six short-handed markers.
The Rochester, N.Y., native has represented the United States at the last two Winter Olympics.
The Lightning also picked up two first-round picks in the Callahan-St. Louis deal, one next year and one in Friday's draft that was a result of the Rangers reaching the Eastern Conference final. Tampa Bay is scheduled to pick 19th, with the spot obtained from New York at No. 28.
Tampa Bay said goodbye to another veteran forward, with left wing Ryan Malone being bought out of the final season of a seven-year contract.