The Kansas City Chiefs finished second in the AFC West with an 11–5 record. On January 9, 2016, Berry started in the AFC Wildcard Game and recorded three combined tackles, a pass deflection, and an interception as the Chiefs routed the Houston Texans 30–0. The following game, he made seven combined tackles in Kansas City's 27–20 loss at the New England Patriots in the AFC Divisional Round. He was named Comeback Player of the Year and was ranked 55th by his fellow players on the NFL Top 100 Players of 2016.
On March 1, 2016, the Kansas City Chiefs offered Berry a franchise tag. He decided to hold out of training camp and offseason activities in the hopes of receiving a long-term contract offer by the Chiefs. On August 28, 2016, Berry signed a one-year, $10.80 million franchise tag to remain with the Chiefs for the 2016 season after both parties were unable to come to an agreement on a long-term contract.
On November 13, 2016, Berry recorded nine combined tackles, two pass deflections, and returned an interception by Cam Newton for a 42-yard touchdown in the Chiefs' 20–17 victory at the Carolina Panthers. In Week 13, Berry made two solo tackles, broke up a pass, returned an interception for a 37-yard touchdown, and became the first player to return an interception for a defensive two-point conversion since the rule was enacted in 2015. His two-point score occurred on an interception by quarterback Matt Ryan during the two-point conversion attempt and provided the winning score for the Chiefs' 29–28 victory against the Atlanta Falcons. He earned AFC Defensive Player of the Week honors for his performance against the Falcons. On December 13, 2016, he collected a season-high 11 combined tackles (ten solo) during a 19–17 loss to the Tennessee Titans. On December 20, 2016, it was announced that Berry was one of four Chiefs players voted to the 2017 Pro Bowl, marking his fifth Pro Bowl selection of his career. He finished the season with 77 combined tackles (62 solo), nine pass deflections, four interceptions, a forced fumble, and two touchdowns in 16 games and 16 starts. Berry received an overall grade of 87.8 from Pro Football Focus, which ranked seventh among all safeties in 2016. He also received the fourth highest coverage grade among his position group (88.7) and fifth highest run defense grade (85.0).