Correia, who led the Padres in victories (12), innings (198) and several other pitching categories, is a San Diego native who returned home a year ago on a one-year deal.
Correia earned $1.1 million last season even though he came to Spring Training on a Minor League deal, with a base salary of $750,000.
A source said Friday that the Padres weren't likely to tender the arbitration-eligible Correia a contract for 2010 before Saturday's 8:59 p.m. PT deadline and that they would likely trade him if they didn't reach a deal before then.
That deal was made official Saturday.
"We both made it clear what we hoped the end result would be," Padres general manager Jed Hoyer said. "We did have conversations with [other] teams; it was more than one conversation. In the end ... this is what we wanted."
Barry Axelrod, Correia's agent, said there was no interest on either side about an option for 2011 or adding a second year to the deal.
But this was clearly where Correia -- who had a 3.91 ERA and tossed a shutout in September against Arizona -- wanted to be.
"This was his first choice," Axelrod said.
Axelrod was in Indianapolis last week where he met with Hoyer at the Winter Meetings.
In all, the Padres tendered contracts to 32 players, including relievers Mike Adams and Heath Bell and third baseman Kevin Kouzmanoff. The club non-tendered right-handed pitchers Jackson Quezada and Mark Worrell.
Corey Brock is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.