The contract is for $14.575 million, multiple sources have confirmed.
That figure is the midpoint of what the Red Sox submitted ($12.65 million) and what Ortiz's camp requested ($16.5 million). Last season, Ortiz earned $12.5 million.
"From the outset of the offseason, we made it very clear we wanted to have David back on the team, and we knew once he accepted arbitration, he was going to be on the team and that was a great outcome for us," Cherington told WEEI.com. "The question was just how much he was going to make. As we got closer to the hearing, I'm happy that both David and the team felt there was some value to avoiding a hearing, settling in the middle, moving on and getting ready for Spring Training."
Ortiz, a seven-time All-Star, is entering his 10th season with the Red Sox.
He will again be a centerpiece in Boston's batting order and had a solid 2011 season, hitting .309 with 29 homers, 96 RBIs and a .953 OPS.
Throughout the process, neither side voiced any public frustration that it took this long to reach a settlement.
"We haven't gone to a hearing for a long time, so when you get this close, you have to be prepared to go," said Cherington. "I had never been that close to a hearing before. It's an exercise, like anything else, where you're getting ready for the potential of a hearing. So you go through your case, how you're going to present your arguments. All along, there was certainly an openness to try and settle this, and we're happy we did.
"I don't want to speak for David, but we're happy this is done, and we can agree on something that is really fair for both David and the team, and move forward and get ready to move into our new complex and get going with Spring Training."
The Red Sox were pleased that Ortiz accepted their offer of arbitration, because it kept him off the free-agent market and guaranteed he would be back in Boston for at least one more season.
"The best DH in the game -- that guy's back on the team," said Cherington last month.
During a brief interview at the Boston Baseball Writers' Dinner, Ortiz said that the arbitration process did not detract from his focus entering 2012.
"Just another year that you come in and do your thing, like usual," said Ortiz on Jan. 19.