Duchene's deal, which runs through the 2018-19 season, is worth $30 million, a source told ESPN.com's Pierre LeBrun.
Duchene had one year and $3.5 million remaining on his current contract. He would have become a restricted free agent next offseason.
"Matt already is and will be a big part of our team's nucleus for the long term," Avalanche executive vice president of hockey operations Joe Sakic said. "We all felt that it was important for us to secure his rights for several seasons. With his great skills, speed and character, he represents the identity we want the Avalanche to be."
Duchene, 22, the third overall pick in the 2009 draft, has registered 82 goals and 193 points in four seasons with Colorado. He had 17 goals and 43 points in 48 games last season.
"In 2009, I was thrilled to have been selected by the Avalanche, my favorite team," Duchene said. "I have worn this uniform with pride in my first four professional seasons in Denver, and I appreciate the organization believing in me for the long-term future.