Madson was 4-2 with a 3.05 ERA in 76 games in 2008. The right-hander played a key role in a strong bullpen, helping the Phillies win their first World Series championship since 1980. Madson finished the season as the primary setup man for closer Brad Lidge, who was 48-for-48 in save chances, including the postseason.

"Ryan has emerged as a quality setup reliever and big game pitcher," general manager Ruben Amaro Jr. said in a statement. "We're very happy that he will be part of our bullpen for at least another three years."

The deal calls for Madson to receive a $1 million signing bonus, $2 million this season, $4.5 million in 2010 and $4.5 million in 2011. He would have been eligible for free agency after next season, and the deal is unusual because many of agent Scott Boras' clients opt to become free agents before agreeing to long-term deals.

He can earn $1.5 million annually in performance bonuses if he becomes a closer: $150,000 each for 30, 35, 40 and 45 games finished; $200,000 each for 50 and 55, and $250,000 each for 60 and 65.

Five Phillies remain in arbitration: Ryan Howard, Jayson Werth, Shane Victorino, Chad Durbin and Joe Blanton.

The Phillies already avoided arbitration with ace Cole Hamels and pinch-hitter/infielder Greg Dobbs. Hamels got a $20.5 million, three-year contract that pays him $4.35 million this year, $6.65 million in 2010 and $9.5 million in 2011.

Madson is 32-21 with a 3.94 ERA and five saves in 295 career games, including 18 starts. He was 1-0 with a 2.13 ERA in 11 postseason games last year.

Madson's deal was first reported on the Philadelphia Inquirer's Web site.