The 23-year-old George, widely regarded as one of the most exciting young talents in the league, averaged a career-high 17.4 points, 7.6 rebounds and 4.1 assists per game during his 2012-03 campaign.
"I want to thank the Pacers for believing in me when they drafted me," George said in a statement. "To continue my career with the Pacers was a very easy decision.
"We have great ownership, a great front office, great fans and I'm blessed with great coaches and great teammates. I use great a lot because that is what this franchise is and I'm hopeful we can be part of great things in the future."
A third team All-NBA selection last season who received the NBA's Most Improved Player award, the six-foot seven-inch George was the 10th overall pick by the Pacers in the 2010 draft.
"Paul represents not only what our team and franchise is about, but what a professional athlete should be," said Pacers president of basketball operations and former NBA great Larry Bird.
"He strives every day to be the best he can be, as a player, as a team mate, as a person and as a representative of this franchise."
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