Questions over the England international's future with the Gunners had rumbled on over the course of the season but reports earlier today claimed that the 23-year-old had agreed a three-and-a-half-year deal.
"I am very happy to have signed a new contract here at Arsenal," Walcott told the club's official website. "Thanks to everyone for their continued support, especially the manager, everyone at the club and most importantly the fans.
"I have made it clear from the start that I wanted to stay at Arsenal so I am pleased we have agreed a deal that everyone is happy with."
Manager Arsene Wenger added: "We are all delighted that Theo has signed a new contract. [He is] a strong player and also a great person, and the combination of his ability and pace always make him such a valuable asset either from the flanks or down the middle.
"Theo's contract extension now gives us a strong nucleus of ambitious young players who have committed to the Club and want to be successful with us as a group."
Walcott moved to the Gunners from Southampton in 2006.