The 20-year-old's previous deal was due to expire in 2017, but he has signed new terms after scoring 17 goals in all competitions last season.
Locadia's extension will be a boost to coach Phillip Cocu, who looks to have an impressive batch of strikers to choose from as PSV go in search of a first Eredivisie title since 2008.
Ajax have dominated Dutch football by taking the last four league crowns, but Locadia will look to link up with Netherlands internationals Memphis Depay and Luuk de Jong in an attempt to fire the Eindhoven club to glory.
Locadia made his Eredivisie debut in September 2012 against VVV-Venlo, and marked the occasion by scoring a hat-trick.
He has since gone on to register 30 goals in 67 appearances, as well as earning six Netherlands Under-21 caps.
