General manager Doug Wilson announced the deal Thursday. He says Demers' ability to play an up-tempo style makes him an important part of the team.
Demers was voted the top rookie on the Sharks last season. He finished with four goals and 17 assists in 51 games. His 21 points were tied for fourth among NHL rookie defensemen.
The 22-year-old Demers also had one goal and four assists in 15 playoff games.
Demers was originally selected by the Sharks in the seventh round of the 2008 draft.