The Dodgers didn't release the terms of the deal, but reports pegged the amount at $85 million.
The pact will lock up Ethier's services through the 2017 season with a vesting option for 2018 that, if exercised, would make the overall deal worth more than $100 million.
"I've said it before, but this is the place I've wanted to be all along and I hope to finish my career in Los Angeles playing for these fans that I have developed such a special bond with," Ethier said. "Now we just have to go out and finish our goal of winning a World Championship."
The 30-year-old two-time all-star has compiled a .292 batting average in each of his last two seasons and sports a .287 average with 53 runs batted in -- best in the National League -- in the current season.
He was working off a one-year, $10.9 million deal signed in January to avoid arbitration and would have been eligible for free agency after this season.