"Dion is our team leader and has been a pillar in our building process," said Leafs GM Dave Nonis. "He has proven to be a very durable and reliable defenceman in all facets of the game. He plays big minutes in every situation for us and we're pleased to have him under contract for the next seven seasons."
Phaneuf, 28, is currently in the final-year of a six-year, $39 million contract that expires June 30, 2014.
The Edmonton-born defenseman had been making $6.5 million, per season, on his deal and will now earn $7 million, annual, on his new long-term contract.
"This is a very proud day for me and my family," Phaneuf said. "I'm very honored to be the captain of this historic franchise and to maintain the opportunity to play and represent the Toronto Maple Leafs for many years to come. We have passionate fans and a dedicated ownership group. I have great teammates and look forward to growing with them and achieving our goal of winning."
In 39 games with the Maple Leafs so far this season, Phaneuf has registered four goals and 11 assists for 15 points, along with a plus-13 rating and 50 penalty minutes.
The three-time NHL All-Star has played in 639 career NHL regular-season games, to date, with the Calgary Flames and Leafs, and has accumulated 110 goals and 245 assists for 355 points.
Phaneuf was originally drafted ninth-overall by the Flames in the 2003 NHL Entry Draft.