Ampadu, who turned 18 last week, joined the Blues from Exeter City last year and has made seven senior appearances.
Comfortable in both defence and midfield, Ampadu has also broken into the Wales side and won rave reviews from manager Ryan Giggs following his starring role in the 4-1 Nations League win over Republic of Ireland earlier this month.
"I'm really proud and happy," Ampadu told Chelsea's official website.
"I'm looking forward to the next five years and all I have got to do now is continue to work hard, and hopefully good things will happen."
Chelsea director Marina Granovskaia added: "Ethan has shown great potential and unbelievable maturity since arriving at Chelsea a year ago.
"In this short time he convinced a lot of people with his exceptional quality and mentality and we look forward to watching him develop into a key player for the club over the coming years."
The teenager's recent rise saw him attract interest from another Premier League side before the transfer window closed, with Cardiff manager Neil Warnock singing his praises.
"I think they should loan us him," he said last week.
"He plays the game simple. He will have to quicken up a little bit, when he gets higher up but that’s the whole object of playing games. When you play with the type of players he plays with, it does help his education."
However, he opted to stay and fight for a chance in Maurizio Sarri's team instead, having been given his first taste of Premier League action last December.
"You could say there's been frustration on one hand, but at the same time I'm getting experience training with the players,” he said.
“I'm just trying to improve to get into the team. This season's plans are this season's plans and at the moment I've just to keep improving to try and get in the team. I want to show the manager what I can do.”