Matthews signed a five-year, $58.17 million deal. The contract has an annual average value of $11.634 million.
Matthews could have become a restricted free agent July 1, but contract negotiations between Toronto general manager Kyle Dubas and Matthews' agents Judd Muldaver and Jeff Jackson heated up in the last two weeks.
"It's pretty special, you kind of think back a little bit to when you were a kid. But for me, I'm extremely proud and I'm happy," Matthews told reporters. "I know my family who is here now is extremely proud of me as well so it's a special day. I love playing here. I love this city, my teammates, management, the whole staff, top to bottom. So for me, it's extremely special."
The 21-year-old forward has 46 points (23 goals, 23 assists) in 38 games this season. Matthews played in 62 regular-season contests last year and notched 63 points (34 goals, 29 assists).
The Maple Leafs selected Matthews with the first overall pick of the 2016 NHL Draft. In 182 career NHL regular-season games, he has 178 points (97 goals, 81 assists). Matthews has seven points (five goals, two assists) in 13 playoff contests.
Matthews won the Calder Trophy as the NHL's Rookie of the Year in 2016-17.