ESPN's Adrian Wojnarowski reported Denver's decision to keep the veteran power forward on Saturday.
Millsap is due to make $30 million in the final season of a three-year, $90 million contract he signed in July 2017.
Wojnarowski previously reported the Nuggets were trying to sign Millsap to a new deal with a lower average salary but added they felt comfortable bringing him back next season at $30 million if they had to:
It wasn't entirely clear if the Nuggets were going to bring back the four-time All-Star. He remained an efficient player, averaging 12.6 points on 48.4 percent shooting and grabbed 7.2 rebounds per game last season, but his overall performance has been on the decline.
Millsap's scoring average was his worst since 2009-10 (11.6 per game) and his 27.1 minutes per contest were his fewest since his second season in 2007-08 (20.8).
Denver already had $90.6 million in guaranteed money owed to players next season before deciding on the 34-year-old's option, per Spotrac. His salary pushes them over the cap, but they are still about $12 million under the luxury-tax threshold.
Even though Millsap's salary likely limits what the Nuggets can do in free agency, there aren't a lot of changes the team needed to make this offseason. Denver is coming off a 54-win season and its first Southwest Division title since 2009-10, and Nikola Jokic established himself as a superstar and potential MVP candidate last year.
Millsap is an expensive role player, but he's only going to cost the Nuggets a lot of money for one season and is already a strong fit in head coach Michael Malone's system.