Hilton’s agent, Drew Rosenhaus, confirmed the transaction Thursday.
Had Hilton and the Colts not come an agreement, he would have been able to become a free agent after this season.
Sometime last week, Colts owner Jim Irsay said he hoped to have a deal done with Hilton by Labor Day.
Since being drafted in the same class as Andrew Luck, Hilton has caught 214 balls for 3,289 yards and 19 touchdowns. Last season he had 82 catches and seven touchdowns for a career high of 1,345 yards.