The defender arrived at the Emirates in the summer of 2014 from boyhood club Southampton and has gone on to make 60 appearances in all competitions.
Chambers spent last term on loan at Middlesbrough and after impressing at the Riverside, was expected to seal another temporary move away for the current campaign.
The 22-year-old has made just a single appearance this season, starring against Doncaster in the Carabao Cup but has now signed a new deal with the Gunners, extending his stay in north London until the summer of 2021.
A club statement read: "Everyone at Arsenal is looking forward to Calum's continued contribution to the club."
The three-cap England international will now be hoping to be given his chance in Arsene Wenger's line-up when the Gunners head to Watford on Saturday.