Escobar, 34, batted .304 with five home runs and 39 RBIs in 2016, his first season with the Angels. He had a .355 on-base percentage batting out of the leadoff spot.
The Angels exercised their option on Escobar, whom they acquired in a trade with the Washington Nationals last offseason, instead of paying a $1 million buyout.
He has a .283 career batting average in 10 major league seasons.
Los Angeles also designated reliever Cory Rasmus for assignment and activated five pitchers from the 60-day disabled list: right-handed starters Garrett Richards, Matt Shoemaker and Nick Tropeano, left-hander Andrew Heaney, and closer Huston Street.
Rasmus repeatedly struggled with injuries while going 0-2 with a 5.84 ERA in 19 games last season, his fourth with the Angels.
The Associated Press contributed to this report.