The deal totals $124 million for the high-scoring left wing, The Washington Times reported
"Alex is the cornerstone of our franchise, and I fully believe that he will help us achieve our ultimate goal of being a Stanley Cup team," General Manager George McPhee said.
"Like all Caps fans, I look forward to coming to Verizon Center or turning on the TV each night and seeing what he will do next, and I am sure we will continue to be amazed at what we see for years to come."
Ovechkin, who had been in the final year of his contract, is now signed through 2021.
He leads the Capitals with 32 goals and 52 points this season.
"My dream was always to play in the NHL, and Washington is my second home," said Ovechkin, a native of Moscow.