The deal, which was first reported by The Athletic, includes a player option for the fourth year in 2025-26, his agent told ESPN. It includes $88 million in base salary and $4 million in incentives, according to ESPN's Bobby Marks.
Gordon, the 11th player this offseason to sign a veteran extension, was dealt to Denver in a March trade that sent veteran shooting guard Gary Harris, rookie R.J. Hampton and Denver's protected 2025 first-round pick to the Magic.
Gordon, who turns 26 on Thursday, averaged 12.4 points, 5.7 rebounds and 3.2 assists in 25 games with Denver. In the postseason, he raised his production to 11.1 points and 5.4 rebounds as the Nuggets made it to the second round before being swept by the Phoenix Suns.
This will be Gordon's eighth season in the NBA after being picked No. 4 overall by the Magic in the 2014 NBA draft.
Denver locked up MVP Nikola Jokic to a five-year deal in 2018 and point guard Jamal Murray in 2019. The next big deal could be for sharpshooter Michael Porter Jr., a long-range threat who averaged 19 points last season.
The high-flying forward might be best remembered for his performances during NBA slam dunk contests. In 2020, he finished as the runner-up in a showdown for the ages with Derrick Jones Jr.
The Associated Press contributed to this report.