Strome could have become a restricted free agent after the season.
The forward signed a one-year, $3.5 million contract with Washington on July 14 as an unrestricted free agent after the Chicago Blackhawks did not make him a qualifying offer following the 2021-22 season.
"He's a good player and he's going to get better and better," Capitals captain Alex Ovechkin said Friday after the 2023 NHL All-Star Skills presented by Draftkings Sportsbook in Sunrise, Florida. "I'm happy for him and happy for the Caps."
The 25-year-old is third on the Capitals with 36 points (11 goals, 25 assists) in 52 games.
"Dylan is an intelligent and skilled center and has been a great addition to our organization," Capitals general manager Brian MacLellan said. "We are pleased to sign him to a long-term contract. We feel his skill set is a great fit for our team as he enters the prime years of his career at an important position."
Strome was selected by the Arizona Coyotes with the No. 3 pick in the 2015 NHL Draft and has 206 points (78 goals, 128 assists) in 325 games with the Coyotes, Blackhawks and Capitals.
NHL.com staff writer Tom Gulitti contributed to this report
