The Republic of Ireland international has been in talks over an improved contract with the Merseysiders for a number of weeks.
He had been reported to be a target for other Premier League clubs including Tottenham as discussions stalled.
But he has now pledged his future to the Goodison Park outfit after reaching agreement on enhanced terms.
McCarthy, 24, has impressed fans with his consistency since his arrival from Wigan Athletic almost two years ago.
The midfielder has now made 76 appearances under manager Roberto Martinez and has scored three goals against Hull City, Newcastle and Manchester United.
McCarthy told evertontv: “I’m buzzing and delighted to be committing my future long-term to Everton.
“I’ve loved every minute I’ve been here, with the fans having made me feel so welcome from day one, as well as the players and staff.
“This is a brilliant club with a brilliant fanbase and what we want to try to do is bring some success here and push forward.
“The gaffer is trying to build a team and a squad for the long-term and I’m excited to be a part of that and to be a part of this team.”