Holmes, who was scheduled to become a free agent Feb. 10, is now signed through the 2016 season.
Toronto selected the six-foot-four 305-pound lineman with the seventh overall pick in the 2011 CFL draft. He joined the Argos in September 2013 and started all 18 regular-season games last season at left guard.
"Tyler is one of the premier young offensive linemen in our league," Argos general manager Jim Barker said in a statement. "He is developing into the player we thought he'd be when we traded into the first round to get him during the 2011 draft.
"Tyler has performed very well on our offensive line and we're happy to keep him in Toronto."
Holmes, an Ottawa native, played college football at Tulsa and spent time with the NFL's Minnesota Vikings before joining the Argos.
"My fiancee and I have built a life in Toronto," he said. "We love the city and the fans here so extending my contract was an easy decision.
"I enjoy playing for this team, the guys in the locker-room have become my friends and I have a great deal of respect for the coaching staff. I look forward to helping bring another Grey Cup to Toronto."
Holmes's father, Richard, played for Toronto, Ottawa and Winnipeg in the CFL.