Terms of the deal were not disclosed, but reports said it's for $12 million U.S.
O'Reilly is just entering his prime, and led the surprise Avalanche with a career-high 28 goals and 64 points last season.
"We are pleased to have Ryan under contract," Avalanche executive vice-president Joe Sakic told the team's official website. "We are looking at the upcoming training camp and season with a lot of excitement."
O'Reilly earned some off-season hardware for his sportsmanship, capturing the Lady Byng Trophy at the NHL awards ceremony in June.
Considered one of the better two-way forwards in the game, the 23-year-old flourished under head coach Patrick Roy.
In seven playoff games last year, O'Reilly scored two goals and four assists in Colorado's first-round loss to the Minnesota Wild.
Drafted by Colorado in the second round (33rd overall) in 2009, the six-foot Clinton, Ont., native has 73 goals and 118 assists in 345 career regular-season games — all with the Avalanche.