"With how much I love playing at Everton, I was delighted to get the chance to sign another contract," Coleman told the club's official website.
Coleman's stellar form last year saw him scoop Everton's Player of the Season award and also make it into the PFA Team of the Year.
The 25-year-old, who had started to shine under previous manager David Moyes, took his game to a new level and flourished under Roberto Martinez's free-flowing style in 2013-14.
His marauding runs forward and stout defending had seen him earmarked as a potential replacement for Bacary Sagna at Arsenal, but Coleman could not be happier to extend his stay with the blue half of Merseyside.
"I've been at Everton five years now and I love everything around the place. I love working with all the players, the staff, the coaching staff - everything. It was a very happy decision to make," Coleman added.
"With the manager and some of the players we have, we're going to the right places."
Coleman's new deal follows hot on the heels of Martinez also signing a new five-year contract earlier this month as Everton set about shoring up the foundations before making any new additions this summer.
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