Financial terms of the contract were not disclosed.
Grabovski has 20 goals and 45 points in 59 games this season. He is third in goals and third in points for the Leafs.
"We are extremely pleased to have Mikhail under contract for the next five seasons," said Leafs president and general manager Brian Burke. "His speed and skill are valuable commodities and fit perfectly with our style of play. He leads by example and his work ethic speaks for itself."
Originally drafted by the Canadiens in 2004, Grabovski has 82 goals and 195 points in 304 career games with Montreal and Toronto. The Leafs acquired the 28-year-old native of Belarus on July 3, 2008 from the Habs for a second-round draft pick in 2010 and the rights to Greg Pateryn.