The news ends speculation of his departure away from the Emirates, with his old contract due to finish at the end of the season.
Walcott, 23, has reportedly committed to a deal that will see him through to the summer of 2016 with the Gunners.
“I am very happy to have signed a new contract here at Arsenal,” said the England international.
“Thanks to everyone for their continued support, especially the manager, everyone at the club and most importantly the fans.
“I have made it clear from the start that I wanted to stay at Arsenal so I am pleased we have agreed a deal that everyone is happy with. What’s important now is for the team to realise its potential and win trophies.”
The player went onto say that, “I have made it clear from the start that I wanted to stay at Arsenal so I am pleased we have agreed a deal that everyone is happy with. What’s important now is for the team to realise its potential and win trophies.”
Meanwhile manager Arsene Wenger stated, “We are all delighted that Theo has signed a new contract. He joined us as a 16-year-old and since then has developed very well to become an extremely important player for both Arsenal Football Club and England.
“Theo is a strong player and also a great person, and the combination of his ability and pace always make him such a valuable asset either from the flanks or down the middle.
“Theo’s contract extension now gives us a strong nucleus of ambitious young players who have committed to the club and want to be successful with us as a group.”