The Hall of Fame coach will be paid $2 million retroactive to last season and $2.3 million next season. Calhoun, who turns 68 on Monday, had been making $1.6 million under a contract that was set to expire on June 30.
Calhoun expressed relief at signing the contract, which took almost a year of negotiations to complete.
"We need to be moving forward," Calhoun said at the news conference. "Any time you stand still, other folks are catching you, and matter of fact, bypassing you. We don't want that happening at UConn."
Calhoun took a took a medical leave of absence in January, missing seven games with an undisclosed condition. The Huskies (18-16) lost to Virginia Tech in the second round of the NIT.
Athletic Director Jeff Hathaway said there were complexities in the contract that caused the delay, but said Calhoun's off-the-court issues played no role in the talks.
"Jim's age never played into these conversations," he said. "Jim's health never played into these conversations. The NCAA review never played into these conversations. Jim is an all-in, 110-percent person. And when he's not all-in and when he's not 110 percent, he's going to tell me, I'm not going to have to tell him."
Calhoun said the contract will allow him to finish his coaching career at Connecticut. But he said that doesn't mean he plans to retire in four years, and joked that he's been consulting Joe Paterno, Penn State's 74-year-old football coach.
"I want to coach at UConn," Calhoun said. "But I also think that I want to make sure I compete with the passion, the energy and be there all the time for them, and that's what I need to make sure I assess every single year."
Calhoun's base salary begins at $325,000 for the season that just ended, and will go up by $25,000 each year of the agreement.
In addition to the base salary, Calhoun receives almost $1.7 million for speaking engagements and media-related appearances for last season.
His total compensation in the 2011-12 year will be $2.7 million and he will receive $3 million in each of the final two years of the contract.
The deal also includes unusual language that would penalize Calhoun $100,000 a year for any scholarship lost by the school because of a poor NCAA academic performance rating by his team. Calhoun said he is committed to the academic success of his team, and the contract backs that up.
"It doesn't mean any more to me now or any less to me now, it really doesn't," he said. "But it's tangible evidence that, yes, I'm really involved in this."
Hathaway said Calhoun's is the first contract at the school to include the APR language, but said he expects it will be included in other coach's deals as well.
Under the contract, Calhoun can retire anytime after the 2010-11 season and receive either $1 million or a five-year job with the athletic department.
It also says the coach can be removed from his job in the event of an NCAA or Big East violation if the coach knew there was a violation and failed to act to correct it within 10 days.
He'll also receive bonuses of a month's salary if the Huskies make the NCAA tournament, two months for a berth in the Final Four and three months if the Huskies win the national championship.
Calhoun has won two national championships at Connecticut and was inducted into the Basketball Hall of Fame in 2005.
Several other off-the-court issues had prompted questions about Calhoun's future, including an investigation into the school's recruitment of former player Nate Miles. Calhoun has acknowledged that he or his staff might have made mistakes in recruiting Miles.
It is not clear when that investigation will be completed. Calhoun said reports that the school had received word that violations have been discovered were erroneous.
"We have not received anything yet," he said. "I expect that we will. They are not going to do a review for 14, 15 months and then say, 'See you later.' That normally doesn't occur."
Calhoun also has been treated for cancer three times during his UConn career, and last summer was hospitalized after breaking several ribs during a charity bike ride.
Women's basketball coach Geno Auriemma, who has guided his teams to seven NCAA titles, has an average annual salary of $1.6 million. Connecticut football coach Randy Edsall makes about $1.5 million per year.