The two sides also discussed multiple-year deals but were unable to strike an agreement. Papelbon will not be eligible for free agency until after the 2011 season.
Papelbon's contract surpasses the $5.65 million deal signed by White Sox closer Bobby Jenks the day before as the largest ever for a closer who entered arbitration for the first time. The previous record was $5 million, by Eric Gagne, in 2004.
Papelbon's contract is also the third highest in history by any first-time arbitration-eligible player. The only ones higher were Ryan Howard's $10 million arbitration award last year and the $7.4 million that was awarded to Miguel Cabrera after he won his case in 2007. So Papelbon's deal becomes the biggest ever by any first-time eligible pitcher -- starter or reliever.
Boston has not gone to arbitration since Theo Epstein became general manager.
"Theo's philosophy is that we have to be prepared every single time. We keep that in mind with the negotiations," assistant GM Jed Hoyer said. "But, if possible, it's the right thing to do. [In arbitration] you have to go in there and speak ill of your own player. We're happy so far we've been able to avoid it."
The Red Sox and Papelbon haven't ruled out exploring a longer deal later in the offseason. There are indications they discussed both two-year and three-year extensions before agreeing to a one-year deal.
Papelbon has emerged as one of baseball's top closers, saving 41 games in 46 chances last year, when he earned $800,000. He has 113 saves in 128 chances and a 1.84 ERA in 3 seasons in Boston.
The 28-year-old Papelbon is one of four pitchers to record 30 or more saves in each of his first three full seasons, joining Billy Koch, Kazuhiro Sasaki and Todd Worrell. He is 29 saves from the Red Sox mark of 132 set by Bob Stanley from 1977 to '89.
Papelbon's ERA is the second lowest in major league history since 1900 among pitchers with at least 200 innings. He also is 2-0 with seven saves in the postseason and has not allowed a run in 25 innings over 16 appearances.
The Associated Press reports that left-hander Javier Lopez agreed to a one-year deal with Boston worth $1.35 million.
Lopez, 31, pitched a career-high 59 1/3 innings over 70 games last season, with a 2-0 record and 2.43 ERA while limiting left-handed hitters to a .182 batting average.
Also on Tuesday, the Red Sox traded right-hander David Aardsma to the Seattle Mariners for 20-year-old lefty Fabian Williamson.
Aardsma was 4-2 with a 5.55 ERA in a career-high 47 appearances, all in relief, for the Red Sox in 2008. Williamson was 4-3 with a 4.10 ERA and 67 strikeouts for Class-A Pulaski.
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