The deal, which is reportedly worth more than $90m (£56m), will keep the 23-year-old with the side for a further five seasons.
Coach Frank Vogel told the team's website: "It's such an exciting day for our franchise and our fan base. To have a guy like Paul under contract for this many years to come, the reward he deserves, he just really represents everything we would want him to.
"You couldn't create on a computer a better all around package than Paul George brings to the Indiana Pacers and our fanbase here."
George averaged 17.4 points per game last season.