Iglesias batted .373 with three homers and 24 RBIs in 39 games in 2019, his first season with the Orioles. The 30-year-old also provided defensive stability in the middle of the infield.
Baltimore faced a $500,000 buyout if it did not exercise the option of extending his contract through 2020.
Iglesias missed time last season with a sore left quadriceps and a bruised left wrist after being hit by a pitch in a September game against Tampa Bay.
He has a .278 career batting average over nine seasons.
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