Pickford, who has played more than 200 times for Everton since joining them from Sunderland in 2017, had been previously linked with a move to Tottenham Hotspur, with his earlier contract set to run out in 2024.
He also has 50 caps for England and was part of the squad that reached the quarter-finals at last year's World Cup in Qatar.
"The past few seasons have not been what we wanted but we now have a manager who I believe will point us in the right direction and get us up the table," Pickford told the club's website.
"I just want to keep working hard and performing for Everton. We know we are in a tough place at the moment in the league but I'm eager to help the team improve this season and then aim for success in the future..."
Everton, who have taken six points from three games under new manager Sean Dyche, are 16th in the standings and host Aston Villa on Saturday.
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