Donovan, whose current contract was up at the end of the season, could be the highest-paid player in MLS if he reaches incentives within the deal.
"This is the place I want to end my career," Donovan said. "I've always wanted to be here. I've always wanted to play here. When other opportunities arose, they paled in comparison to playing here."
The 31-year-old Donovan has been with the Galaxy since 2005, winning three of his five career MLS Cup titles in Los Angeles. The fleet-footed midfielder is the third-leading goal-scorer in MLS history, trailing leader Jeff Cunningham by just three goals.
Donovan is a Southern California native who has been the face of American soccer for a decade, playing a leading role in the last three World Cup teams while becoming the U.S. national team's career scoring leader in 150 appearances.
He's equally important to the Galaxy after leading the league's glamour franchise to its second straight MLS Cup championship last December. Donovan got off to a slow start this season after returning in late March from a self-imposed soccer sabbatical, but Los Angeles patiently waited for Donovan to return to his current form while negotiating a long-term deal for his future.
"Was this day ever in doubt? Yeah, for a lot of reasons," Donovan said. "I didn't know five months ago if I wanted to keep playing much longer. ... With a lot of support from family and the Galaxy, it's really clear to me that I want to keep playing. I've found my passion again."
Donovan, who played in Germany and England earlier in his career, attracted attention from European clubs this year while his MLS future was uncertain. Donovan emerged from his hiatus and subsequent negotiations totally committed to MLS and the Galaxy, saying he's not interested in going to Europe on loan during the winter.
"I've never made decisions for money, and I think I'm a much happier person for it," Donovan said.
The Galaxy are grateful to hear he's comfortable and committed. Donovan is one of Los Angeles' three designated players -- who can receiver higher salaries than MLS regulars -- joining Irish national team star Robbie Keane and U.S. national team defender Omar Gonzalez.
"It's a tremendous signing, a historic signing for us," said Dan Beckerman, the CEO of Galaxy owners AEG. "It's overwhelming and staggering what he's accomplished in this league and his career. He's always demonstrated his commitment to growing soccer in this league and in this country. A lot of success that MLS has had is attributable to his effort."
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