The deal comes after Grubauer and his former team, the Colorado Avalanche, were unable to come to a contract agreement. Those discussions carried over into Wednesday, sources say, before Grubauer eventually signed with Seattle.
Grubauer was a Vezina Trophy finalist last season and backstopped the Avalanche to the Presidents' Trophy.
Grubauer, 29, picked the right time to have the best season of his nine-year career. He led the league in shutouts with seven. He was second in wins (30) and goals-against average (1.95) and eighth in save percentage (.923).
Before being traded to the Avalanche in 2018, Grubauer was a part-time player in Washington for six seasons. Last season's production came at a great price since Grubauer was playing on a three-year deal with a cap hit of only $3.33 million per season. He was due a raise, but Colorado was pinched after paying star young defenseman Cale Makar and captain Gabriel Landeskog.
Colorado is now on the search for goaltending help.
The Kraken, meanwhile, have a surplus of goalies. They selected Chris Driedger, Vitek Vanecek and Joey Daccord in the expansion draft. Driedger was poised to be the top goalie in Seattle next season, and agreed to a three-year, $10.5 million contract with the Kraken.
Seattle now may to try to leverage its position of strength, and trade one of the younger goalies. Sources say the Washington Capitals reacquiring Vanecek, 25, is not out of the question.
The Kraken also have a deal with former Panthers forward Alex Wennberg on a three-year deal with an annual average value of $4.5 million.
Wennberg had a career-high 17 goals last season. He added 12 assists in his only year in Florida. The 26-year-old's best season came in 2016-17, when he had 59 points for Columbus.