Masslive.com reported the 22-year-old's contact through the 2018 season includes a $12.5 million signing bonus and $16 million guaranteed.
Hernandez had 70 catches for 910 yards and seven touchdowns in 14 games last season.
Coach Bill Belichick said the team was "happy with the deal."
"Aaron's worked hard and improved a lot in all phases of the game," Belichick said. "Passing game, running game, protection, his overall versatility -- he's done a good job for us. ... He's a hard guy to cover."
Hernandez's extension follows the six-year $54 million extension the team gave tight end Rob Gronkowski in June that runs through the 2019 season.