Walcott has signed a new deal that will keep him at the club for three-and-a-half years and earn him £100,000 a week.
The 23-year-old's previous contract ran out at the end of this season, leading to speculation linking him with a move away from the club.
The likes of Liverpool were thought to be interested in the forward, but Arsenal boss Arsene Wenger confirmed yesterday that they were close to reaching a deal to keep Walcott at the Emirates Stadium.
Both parties have now come to an agreement to ensure that Walcott will stay beyond the end of the season as the Gunners look to end their eight-year search for a trophy.
Walcott has scored 14 goals in 24 appearances for Arsenal so far this season.