Pence will make $6.9 million rather than the team's offer of $5.15 million.
Arbitrators Robert Herzog, Margaret Brogan and Fredric Horowitz made the decision Saturday, a day after hearing arguments.
Pence hit .282 with 25 homers, 91 RBIs and 18 steals last year, when he made $3.5 million. Houston had won its previous four arbitration hearings.
The three cases matched the low since the process started in 1974. Pittsburgh pitcher Ross Ohlendorf won his case this year and Los Angeles Angels pitcher Jered Weaver lost.
The majority of the 119 players who filed for arbitration in mid-January settled.