The England U21 international spent last season on loan at Watford and is yet to make his competitive first-team debut for Chelsea.
But the 18-year-old, who can play in central defence or midfield, is highly rated by boss Jose Mourinho, who says he has a big future in the game.
Mourinho told the club's website: "He's a very, very good player and I like him very, very much. I am very impressed. For sure he is a Chelsea player."
Chalobah said: "It is great for me that Chelsea are willing to give me such a long contract, it is a big confidence boost.
"I think I have developed a lot as a player but I know I must continue to improve to earn a place in the Chelsea team and with my future settled, I can concentrate on doing that.
"Watford was a great experience, I learned about playing in front of a crowd every game and so many other lessons that there are too many to list.
"Training with Jose Mourinho and the Chelsea squad this pre-season, every session has been different with something new to take on board. I've enjoyed it a lot.
"I would like to thank all the coaches who have helped me throughout my time at Chelsea."