Terms were not disclosed, but sources confirmed to ESPN that the deal is worth up to $24 million.
Grant is one of the NFL's fastest players, and his speed figures to play a significant role in creating big plays for the Dolphins in 2019 and beyond.
Grant, a 2016 sixth-round pick, was set to be a free agent after this season. Now he'll be under contract until 2023.
The diminutive (5-foot-6, 170 pounds) yet strong Grant made a name for himself early in his NFL career as a feared returner. Grant has three career return touchdowns, including two last season.
Grant led the NFL with 16.3 yards per punt return (minimum 10) last season and was second with 29.7 yards per kickoff return (minimum 15), according to ESPN Stats & Information.
He has improved as a receiver every year of his NFL career. Grant figures to remain an asset in offensive coordinator Chad O'Shea's scheme as a vertical, take-the-top-off-the-defense wideout.
NFL Network was the first to report the terms of the deal.
Grant had a career-high 268 receiving yards before missing the last six games of the 2018 season with a calf injury.
This is the second notable extension the Dolphins have made this offseason with a member of their 2016 draft class. They also signed Xavien Howard to a five-year, $75.25 million extension that made him the NFL's highest-paid cornerback in May.