"I'm truly flattered and honored that I get to be Raven for life," Suggs said during a news conference to announce the deal.
Suggs, 31, will receive $21 million over the first three years of the contract, which includes $16 million guaranteed. The Ravens also freed up $4 million in cap space.
A first-round pick in 2003, Suggs has been to six Pro Bowls and was named NFL Defensive Player of the Year in 2011. He is the team's all-time leader in sacks (94.5) and forced fumbles (29).
Ravens general manager Ozzie Newsome said he recently watched film of Suggs and gained a new appreciation of the linebacker's play.
"He affects [offenses] in the passing game as well as the running game," Newsome said. "It was something that jumped out to me."
Suggs had a tremendous start in 2013 with nine sacks in his first eight games. But he managed only 20 tackles and one sack in his final eight games.
"I think I was probably trying to do too much," Suggs said. "As one game went by and two games went by, it was like, 'I need to get a sack, I need to get a sack.' I stopped letting the game come to me."
Suggs was entering the final year of his contract, and there was speculation the Ravens may cut him if the sides didn't agree to an extension.
With his status no longer in question, Suggs said he is pleased to know he'll never wear another team's uniform.
"That's the plan, unless Ozzie has a trick up his sleeve," Suggs said. "Sizzle will be a Raven for life."