Spanish midfielder 30-year-old Santi Cazorla has also extended his deal for two more years.
“Both are top quality players who are hugely important and influential to our squad,” manager Arsene Wenger was quoted as saying by bbc.co.uk.
“As well as their huge contributions on the pitch, they both have a great deal of experience and are very popular off the pitch,” Wenger said.
English international Walcott so far has netted 50 goals from 208 league appearances since signing from Southampton in 2006.
Walcott had been linked with a move away from the club with Chelsea and Liverpool willing to give him a central striking role. But he was impressive last season for the Gunners, scoring a hat-trick and then netting the first goal of their FA Cup’s 4-0 triumph in the final against Aston Villa.
His form has strengthened his position in the outfit. Walcott is also the longest-serving player in Arsenal’s squad.