Holtby, who was set to become a restricted free agent after this season, will earn $1.7 million in 2013-14 and $2 million in 2014-15 while John Erskine, 32, reached a two-year deal worth $3.925 million.
The 23-year-old Holtby has a 5-6-0 record this season with a 3.37 goals-against average (GAA), an .896 save percentage and one shutout.
Holtby opened the season 0-2-0 before Capitals first-year coach Adam Oates turned to back-up netminder Michal Neuvirth.
Neuvirth, however, was ineffective and Holtby, who was 7-7 with a 1.95 GAA for the Capitals during last year's Stanley Cup playoffs, has fared much better since re-entering the starting line-up.
Erskine has two points in 11 games and is averaging a career-high 19 minutes, 30 seconds of ice time this season.
