The deal includes $10 million in guarantees, according to the The Charlotte Observer.
Over nine seasons with the Panthers, Davis recorded 745 tackles, 17.5 sacks and 13 forced fumbles.
The 32 year old appeared in at least 14 games in seven of those seasons. He has started in all but four of the Panthers' games in the past two seasons.
"Signing this extension is something I've wanted to do all along, and it just confirms that I now get to officially end my career as a Carolina Panther and that means the world to me," Davis said in a release.
"You see so many guys come through this league that can't say they finished with the same team. It's truly an honor. I feel this is the best organization in the entire league, and I don't take this for granted."
Davis, who Carolina selected in the first round of the 2005 draft, has undergone three ACL surgeries during his time with the franchise.
During the 2013 season, in the aftermath of his most recent surgery, Thomas' 7.1 yards-allowed-per-reception was the lowest among any full-time linebacker, according to NFL.com.
In January, Davis was named the 2014 Walter Payton Man of the Year.