Financial terms of the contract were not disclosed but local media reports said it is worth $59.5 million, which would put Lundqvist $1.5 million above the $7 million annual salary for Nashville's Pekke Rinne and Boston's Tuukka Rask.
"Since his arrival in New York in 2005, Henrik has consistently been one of the elite goaltenders in the NHL," Rangers general manager Glen Sather said in a statement.
"He is a proud representative of the tradition and class of this organization and we are excited to have him remain as a cornerstone of the franchise."
Lundqvist, 31, has been voted a Vezina Trophy finalist as the league's top goaltender in five of his eight NHL seasons, winning the award following the 2011-12 campaign.
The two-time Olympian, who led Sweden to Olympic gold at the 2006 Turin Games, was in the last year of his current contract.
While Lundqvist had insisted his contract status was not a distraction for him, he has had an underwhelming start this season with an 8-11-0 record, 2.51 goals against average and .917 save percentage.
The three-time NHL All-Star entered the season as the only goaltender with an active streak of eight straight 20-win seasons, and holds the record for most consecutive 30-win seasons to begin his career with seven straight.