The deal is worth more than $22 million with incentives that could raise the total value to $24 million, according to NFL.com's Michael Silver.
Reid, who was set to become an unrestricted free agent prior to signing, joined the Panthers in Week 4 of the 2018 season after agreeing to a one-year contract with a $1.39-million base salary.
The safety spent five seasons with the San Francisco 49ers from 2013-17 and was the first to kneel in protest with Colin Kaepernick during the national anthem in 2016.
Reid continued to kneel in protest during the 2018 campaign and repeatedly called out the NFL after amassing what he claimed was an inordinate amount of drug tests from the league. The NFL and NFLPA later released a statement denying Reid as a target for repeated drug testing.
A grievance filed by the NFLPA against NFL team owners on Reid's behalf last May is still active. He believes NFL owners colluded to keep him out of the league because of his weekly kneeling during the national anthem.
The 27-year-old had 71 combined tackles, five passes defended, one sack, and one interception in 13 games this past season.