The total value of Brady's deal is $60 million over four years, and would keep him in New England through the 2019 season when he will be 42 years old.
The four-time Super Bowl champion has always maintained he could play well into his 40s.
The deal has been filed officially with the league and carries low base salaries -- $1 million -- for each of the next two seasons.
The lower base salary saves Brady in the event he serves a four-game suspension for Deflategate -- he'll only lose $236,000 in salary versus more than $2 million based on his previous deal.
"I'd like to play a long time, yeah, a long time," Brady said in October. "There's a lot that goes into playing well. I've played with a lot of great teammates. But I want to play for a long time, maybe 10 more years. I think that's probably what my goal is.
"Well, it's not always up to me. That's what my goals are, so that's just what I'm hoping. And it will take a lot to achieve that. Obviously, a team has to want you, but I think that's ... you know, I love playing this sport. I love making a commitment to my teammates and my coaches, and hopefully I can do it for a long time."
With this extension, Brady will get his wish.
Brady's salary-cap charge for 2016 was scheduled to be a team-high $15 million and the extension lowers that number to $14 million.