The deal comes after the Oilers gave captain Connor McDavid a contract with the highest annual average value ($12.5 million) in the league this offseason.
The 21-year-old Draisaitl, who was a restricted free agent, was second in scoring on Edmonton last season with 29 goals and 48 assists for 77 points. He led the team in scoring during the playoffs with 16 points in 13 games.
"I never thought about going anywhere else," Draisaitl told NHL.com by phone from Prague, Czech Republic. "We wanted to get it done, but we knew from the beginning there was no rush. We had lots of time, and I'm just very happy to have it done."
The Germany native had 51 points in 2015-16, his second in the league.
Draisaitl finished his entry-level deal this past season, getting a base salary of $925,000 with performance bonuses of $2.475 million.
Edmonton's 103 points were the most the franchise had since 1986-87. The team made the playoffs for the first time since 2006, eventually losing in seven games to the Ducks in the second round.
"We have so many great guys and we're so tight in the dressing room," said Draisaitl, who spent the majority of the season on a line with Oilers Captain Connor McDavid and winger Patrick Maroon.
"We love playing for each other and get along really well -- the whole team -- and for me, that was just something I really wanted to be part of," Draisaitl said, according to NHL.com.
Draisaitl said that he is working out in Prague with the same trainer he has used the past three years.
"We want to take that next step," he told NHL.com. "We need to make sure we have a good start and come out strong. As a team, we have the right pieces in the right places, and it's up to us to bring it every night."