Terms of the deal were not officially disclosed, but the veteran lineman will receive $33 million over two years, according to NFL Network's Tom Pelissero. That would make Castonzo the NFL's highest-paid left tackle in terms of annual average salary.
The 31-year-old said he was considering retirement after the 2019 season but opted to continue his career after the Colts publicly stated their desire to re-sign him.
Castonzo has started 132 games for Indianapolis since being selected in the first round of the 2011 draft.
The veteran has been a key piece of an offensive line that's been one of the league's elite units since the arrival of All-Pro guard Quenton Nelson.