The Twins said the deal for Blackburn also includes a club option for the 2014 season worth $8 million.
The right-hander started 33 games last season for the AL Central champion Twins, compiling an 11-11 record with a 4.03 ERA during a career-high 205 2/3 innings.
For his career, he is 22-24 with a 4.14 ERA in 72 career games with Minnesota.
The Twins also said they have signed all the remaining unsigned players on the team -- 20 in all, including pitchers Brian Duensing, Jose Mijares, Glen Perkins, Kevin Slowey and Anthony Swarzak, outfielder Denard Span, infielder Alexi Casilla and backup catcher Jose Morales.
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