The deal was officially announced on Sunday.
"I enjoy my role here," Kotsay said. "Being a part of this club going forward is exciting for me, to have this opportunity and be one of the leaders of the club inside the locker room and to be able to contribute on field still and have some success is something that I enjoy doing. I love the game of baseball, and couldn't be more happy to have this opportunity to do it at home in San Diego."
Kotsay is hitting .275 this season with one home run and nine RBIs in 102 at-bats. Kotsay, who will turn 37 on Dec. 2, is 9-for-31 (.290) as a pinch-hitter this season.
Going back to Spring Training, Kotsay has been a positive influence in the clubhouse and a mentor of sorts to several players on the roster who are low in service time.
"Kotsay has done a very good job in a number of areas, primarily as a player," said Padres manager Bud Black. "He's done a nice job when he gets his starts, he's a very valuable pinch-hitter from the left side. He's won a couple games for us with some big hits late. That's the main thing -- he's still providing good play.
"And he's a great sounding board for our players. He's a guy that there's no doubt on our club is needed with the amount of younger players who can seek him out for counsel."
It's a role Kotsay has embraced since the start of Spring Training.
"It's not about the words you speak ... Tt's about your actions, the way you go about handling yourself as a professional day in and day out, both on and off the field," Kotsay said earlier this season.
"Hopefully I can come across in a positive manner and that flows over and the guys learn that you've got to put in the work and effort to get the result on the field."
Kotsay originally signed a one-year deal with the Padres worth $1.25 million last Nov. 15.
Kotsay's extension comes on the heels of two moves general manager Josh Byrnes made in July, when the team gave outfielder Carlos Quentin a three-year deal for $27 million and closer Huston Street a two-year deal for $14 million.
Going into Sunday's series finale in Pittsburgh, Kotsay had made 15 starts in left field, five starts in right field and two starts at first base.
In the span of a week earlier this season, Kotsay had a pinch-hit two-run double in the eighth inning in a 2-1 victory over the Nationals, and then, five days later, he had a two-run pinch-hit home run in the eighth inning which helped the Padres to a 2-0 victory over the Brewers.
Kotsay, in his 16th Major League season, also played for the Padres from 2001-03. He was a first-round pick of the Marlins (ninth overall) in 1996 out of Cal State Fullerton.