The club did not disclose financial details of Friday's announced deal but CBSSports.com reported the contract is worth $52.5 million.
Kipnis gets a $1 million signing bonus plus a $2 million salary this year. The amount increases each year with $4 million in 2015, $6 million in 2016, $9 million in 2017, $13.5 million in 2018 and $14.5 million in 2019.
If the Indians exercise their option for 2020, Kipnis will earn $16.5 million that year. They can also buy him out for $2.5 million.
The contract buys out Kipnis' final pre-arbitration year, three arbitration years, first two free agent years and the option covers his third eligible free agent year.
The deal is reportedly nearly identical to the extension the St. Louis Cardinals gave second baseman Matt Carpenter in March. The two players have the same amount of service time, but Kipnis is 17 months younger than Carpenter.
Kipnis, 27, is coming off his first All-Star season, batting .284 with 17 home runs, 84 RBIs, 86 runs, 160 hits and 30 steals in 2013, his second season in the major leagues.