The deal, reportedly worth $35 million, locks up Billingsley for two years after he would have been eligible for free agency. He will earning $6.275 million this season.
"Even when I was in the Minors, I enjoyed the winning aspect of the Dodgers and the history and tradition," Billingsley said. "It is something I enjoy being apart of, and I'm happy I will be apart of it for a few more years."
Billingsley said talks of a contract extension began at the beginning of Spring Training and continued to progress before the deal was ultimately completed Tuesday.
Posting a winning record in each of his five Major League seasons with the Dodgers, Billingsley, 26, is 59-41 with a 3.55 ERA in 160 career games (131 starts).
"Through his professional career Chad has shown that he is very capable of winning games and taking the ball," Colletti said. "His won-loss record speaks to that as well as his innings pitched totals."
During the last three seasons, Billingsey's 551 strikeouts rank sixth in the National League. Playing in his first All-Star game in 2009, Billingsley went on to record a career-high 16 wins and a career best 3.14 ERA that season.
Last year, the righty posted a 12-11 record with a 3.57 ERA. Billingsley did not give up a home run in 2010 from May 31-Aug. 28, a span of 92 innings, which was the longest in the Majors last season.
Drafted by the Dodgers in the first round (24th overall) of the 2003 First-Year Player Draft, Billingsley went on to win the Dodgers' Branch Rickey Minor League Pitcher of the Year Award in 2004 and 2005.
Billingsley has exceeded 170 strikeouts in each of the past three seasons, with a career high of 201 in 2008.
Quinn Roberts is a contributor to MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.