The Chicago White Sox have agreed to a two-year, $29 million extension with Jake Peavy, the team announced Tuesday.

The White Sox also declined the options on Kevin Youkilis and Brett Myers. They exercised the option on Gavin Floyd.

"Jake Peavy showed again last season why he is capable of being one of the top pitchers in the American League," Sox GM Rick Hahn said in a statement. "Early on in this process, Jake expressed his strong desire to remain with the White Sox, and we're happy to reach a deal that keeps him at the top end of our rotation and his influence in our clubhouse for at least the next two years."

Peavy, 31, went 11-12 with a 3.37 ERA in 219 innings and 194 strikeouts in 32 starts with the White Sox in 2012. He ranked among the American League leaders in quality starts (third, 23), complete games (tied for third, 4), strikeout-to-walk ratio (fourth, 3.96), IP (5th), opponents average (fifth, .234), shutouts (tied for seventh, 1), strikeouts (eighth), ERA (ninth) and starts (tied for 10th).

"I'm really excited to come back to Chicago and build on what we did last year," Peavy said in a statement. "I made no secret of the fact that this is where I want to play. Chicago is a great city with great fans, and I can't think of a better place to try and win a championship. With the guys we have coming back, I think we have a great opportunity to accomplish some special things."

Peavy will receive $14.5 million in both 2013 and 2014. If Peavy reaches innings pitched thresholds over the course of the 2013 and 2014 seasons, he can elect to extend the contract to include the 2015 season at a salary of $15 million. Peavy will now receive the $4 million buyout payment due under terms of his previous contract in equal installments between 2016-19.

"We certainly knew those options were out there," said Peavy, referring to passing up potentially more money as a free agent. "This is about the way I feel about the White Sox organization . From the time I got there, the fan base stood behind me through a few rough years with injury. I did all in my power to be where we are today, returning to the place that I am the happiest."