Already contracted until the end of 2028, the key forward has backed the club in to rise from the doldrums.
With just one win from their last 29 games and searching for a new full-time coach, Essendon have had few positives in the last 18 months.
At just 20, Caddy is leading the Bombers' goal-kicking (30) and score assists (11) this year.
"Committing until the end of 2031 was an easy decision for me," Caddy said.
"I wanted to back the club and take responsibility for my own career as well.
"I just want to keep learning, improving and play my part in helping Essendon become a successful team. I feel like we're building something pretty exciting.
"We've got a young group that's always looking to get better and I'm looking forward to seeing where we can take it over the next few years.
"There are still a few things we've got to keep working on, but we are heading in the right direction. You can see everyone buying in and wanting to improve and that's exactly what I want to part of.
"We've got a lot of confidence in where this group is heading and we're all working hard to get there."
Essendon list boss Matt Rosa hailed Caddy's commitment as a significant moment for the club.
"Nate's re-signing is a powerful statement of belief in this footy club, and we're thrilled he's committed his future to Essendon," Rosa said.
"Nate has made it clear he wants to be part of leading this club back up the ladder.
"That ambition is exactly what we want at the core of this list."
After being drafted with pick 10 in 2023, Caddy has kicked 59 goals across 42 games.
The Bombers face the mammoth task of playing dual reigning premiers the Brisbane Lions at the Gabba on Sunday.
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