The contract is the second highest figure for a New Zealander in the league. Ross Taylor went to the Rajasthan Royals for US$1 million last year.
It is a considerable boost in income for McCullum. Last year he moved to the now defunct Kochi Tuskers Kerala for what was then seen as a relatively low US$475,000 a season.
However, IPL salaries can be reduced considerably by a number of conditions. They include a deduction of 20 per cent if the player's team does not make the Champions League. A further 20 per cent can be deducted on a pro rata basis if players are available but not selected. If players are injured during the tournament, salaries can also be reduced by 50 per cent.
Limited spaces were available in the franchises and late last night only one of the nine other New Zealanders had been signed in the edition five IPL auction.
Doug Bracewell wasn't picked up first time around for his reserve price of US$50,000, but the Delhi Daredevils later scooped up the Black Caps paceman at the end of the auction.
There was no luck for Tim Southee however, offered at a reserve price of US$100,000, after playing for the Stephen Fleming-coached Chennai Super Kings last season.
Indian limited overs player Ravindra Jadeja was the star attraction, going beyond the maximum bidding of US$2 million. The attacking left-handed middle-order batsman and left-arm spinner is seen as a classic limited-overs player. He was eventually picked up by Chennai Super Kings for an undisclosed sum after they entered a tie-breaker bid with the Deccan Chargers.
Of the overseas players picked, Mahela Jayawardene went for US$1.4 million to the Delhi Daredevils, Muttiah Muralitharan went for US$220,000 to the Royal Challengers Bangalore and Herschelle Gibbs was a bargain for the Mumbai Indians at US$50,000.
