Hillen will earn $700,000 in both the 2013-14 and 2014-15 seasons. He has been a regular in the lineup since missing 25 games this year with an upper body injury.
The Capitals also assigned defensemen Tomas Kundratek and Dmitry Orlov to Hershey of the AHL and activated defenseman John Erskine from injured reserve. Erskine had been out since March 9 with an upper body injury.
The Capitals signed free agent defenseman Nate Schmidt to a two-year, entry-level contract beginning this season. Schmidt comes from the University of Minnesota.
The Capitals made two trades involving minor leaguers. They acquired left wing Dane Byers from Edmonton for defenseman Garrett Stafford and forward Joel Rechlicz from Phoenix for forward Matt Clackson.