The 26-year-old forward could have become a restricted free agent July 1.
"I love to live in Las Vegas," Karlsson said Tuesday. "I think it's a great town. It's the most fun place to play in, T-Mobile [Arena]. ... It's awesome, and I'm very happy to stay here."
He had 56 points (24 goals, 32 assists) in 82 regular-season games with the Golden Knights this season and five points (two goals, three assists) in seven Stanley Cup Playoff games.
Karlsson avoided arbitration by signing a one-year, $5.25 million contract as a restricted free agent Aug. 4, 2018.
"Last summer was a bit of a pain, for sure," he said. "It's nice to have it done rather quick this year. Not have to worry about. Now it's official, now it's out there, and now it's done. Just focus on the right things now."