The 20-year-old made 26 appearances for Roberto Martinez’s side last season and earned England honours on the back of some impressive performances, with the club keen to fend off the interest of several suitors by securing him on a new long-term deal.
"I am over the moon," Stones told the club's official website. "It's just been such a great last season and to get pen to paper on a new deal is a dream come true.
"The last 12 months have been so enjoyable thanks to the faith that the manager has shown in me and all the players. What we achieved was unbelievable. It was a very memorable season and hopefully there's more to come.
“I’m learning off Jagielka, Distin and Alcaraz every day. I’m getting better, stronger and wiser."
Stones has now followed Ross Barkley and Seamus Coleman in signing a new contract with the club.
He joined Everton from Barnsley in January 2013 and has quickly made his mark in the top flight.
Everton boss Martinez said: "It is an important signing for the club and a really good reward for a young footballer with a fantastic future.
"He had an excellent season in 2013-14 and it's really good news all round.
"It is very important that we continue to let our youngsters continue to develop into bigger roles."