The Seahawks did not disclose terms, but a source told ESPN's Josina Anderson that Chancellor agreed to a three-year extension worth $36 million.
The deal includes $25 million in guaranteed money, a source told ESPN. That ranks seventh -- just behind teammate Earl Thomas -- among current safety contracts, according to ESPN Stats & Information.
Chancellor indicated on Monday that the two sides were close to finalizing a deal. The Seahawks now have $123 million in guaranteed money committed to their secondary, which is $32 million more than the Cardinals, who are No. 2 in the league.
"I love this team," Chancellor said. "They gave me the first opportunity and the only opportunity, and I would love to retire here."
Chancellor, 29, started 12 games last year and played at a high level with two interceptions, a forced fumble and 85 tackles. He wanted a new contract before the 2015 season and held out through the first two games.
Widely considered the leader of the Seahawks' defense, Chancellor will now be under contract with the team through 2020.
He was asked Monday how much longer he wants to play.
"As long as the wheels let me," Chancellor said. "Until the wheels fall off. Can't really put a time frame on how long I want to play. However long my body holds up, however long the Lord allows me to. It's never up to me.
"I'm not the same rookie I was seven years ago. It's a lot different. Everything is going to change. It won't stay the same forever. So it's going to change here and there."
A four-time Pro Bowl selection, Chancellor has 12 career interceptions in seven NFL seasons, all with Seattle.