The fourth year of the deal is a team option, sources said.
Malone made the strongest impression with general manager Tim Connelly and president Josh Kroenke in meetings with Denver’s management and overtook interim coach Melvin Hunt to win the job, sources said.
The Nuggets were 30-52 in 2014-15, which included the March firing of coach Brian Shaw.
Despite Sacramento’s stunning decision to fire Malone as its coach early in the 2014-15 season – his second year on the job – the work Malone had done to create more professionalism and focus with star center DeMarcus Cousins had earned him praise and respect around the NBA.
With Cousins hospitalized because of an illness, the Kings fired Malone after an 11-13 start. In two years on the job, Malone was 39-67 after taking over a full-blown rebuilding project.
Malone had been an NBA assistant coach with Golden State (2011-13), New Orleans (2010-11), Cleveland (2005-10) and New York (2001-05).
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