The 33-year-old spent last season on loan at Goodison Park and became an integral figure for manager Roberto Martinez, making 36 appearances.
Barry was out of contract after his deal with Manchester City expired and had been considering a number of offers but has decided to make his stay with the Toffees a longer-term arrangement, with the contract announced on the club's website.
The former England international is Martinez's first signing of the summer as the Spaniard looks to bolster his squad with possibly six new arrivals as he prepares for the additional demands of a Europa League campaign.
"I was really keen to get this sorted before the lads come back to training on Thursday
I'm delighted now that everything is signed and that I'm going to be spending the next few years at Everton," Barry told evertontv.
"When you are on loan, it is never the same as being a signed player
I was really settled last year - but now I am an official Everton player and it feels really good.
"From the moment I signed last year I settled in straight away
T here is a fantastic history here and it was brilliant working with the manager
"I have learned so much from him, it is a great set of players and the fans were fantastic last year - just everything about Everton feels right
The training ground, the facilities, the history - there is so much that is positive about the club."
Barry believes the 10 months he spent working with Martinez were among the best of his career and he is looking to push on again.
"In terms of a whole season, last season has to be one of my best - the performances the team put out, the club record points total in the Premier League, the big wins, there were so many positives," he added.
"But that is last season
Now we try to improve on that and if we do improve then we are going to be going to some very good places.
"The whole squad is always so keen to learn and never satisfied
From the manager right through the coaching staff to the players, everybody wants to improve.
"We will have to treat this season with respect - it is going to be very different with the Europa League and there are a lot more games.
"But I'm sure the manager will have his plans for that challenge ready and I'm looking forward to it.
"It is good to be in the dressing room alongside so much young talent and whilst they are young, they are ready now and that is fantastic.
"There is a lot of experience here already and if I can add something to that, it is great.
"It is (going to be) good to get back to training on Thursday now I'm signed."
Source : PA
Source: PA