Alex Iwobi came through the Gunners’ academy and was handed his first-team debut by Arsene Wenger nearly three years ago.
Lazio had been linked with a move for Iwobi this summer, but he has committed his future to Arsenal.
Boss Unai Emery told the club’s website: “I’m very pleased Alex has signed a new contract with us.
“He is a great example of a player who can succeed from the Academy through hard work and I look forward to working with him and our other talented young players in the squad.”
“It’s always been my childhood dream to represent Arsenal, from young,” Iwobi told Arsenal media during his signing presentation.
“To get an extended contract is an amazing feeling and I hope I’m doing the Arsenal family proud as well as my family.
“It feels so special. The first kit I had was Arsenal and long may I continue to represent them.”