Keeping Pocock until the end of 2019 is a major boost for the Australian Rugby Union (ARU), which has seen a host of top talent leave for Europe, but they had to pay for their prize with unprecedented flexibility.
The deal, which will also see Pocock remain at Super Rugby side ACT Brumbies, allows the Zimbabwe-born 27-year-old to take next year off to "further his studies and personal development" before returning in 2018.
Pocock said he was still not sure what he would do with his season off but was pleased the protracted contract negotiations had finally been put to bed.
"I think from the start I was always keen to stay, it was just a bit unusual taking time off next year that's why it took a bit longer," he said in Canberra.
"This is my 11th season of professional rugby and I feel like a little bit of a break will be good for the mind and good for the body, and good for the soul too."
Brumbies coach Stephen Larkham, who was an assistant to Michael Cheika as the Wallabies reached last year's World Cup final, underlined Pocock's importance to both Super Rugby and national teams.
"He's an unbelievable player, one of the best in the world, if not the best in the world in his position," he told reporters in Canberra.
"At the World Cup, there were periods there, as coaches, when we were pretty nervous when we didn't have 'Po-ey' on the field. But when we had him on the field, we pretty much knew we were going to win the game."
Pocock has played 55 tests for Australia since his debut in 2008 despite missing most of the 2013 and 2014 seasons with back-to-back knee injuries.
"I've loved the last four years in Canberra at the Brumbies," he added. "There was a couple of tough years in there but they stood by me."
Pocock, who runs a charity in Zimbabwe and is an outspoken advocate for a variety of causes from same-sex marriage to the environment, said reports that he was hoping to study at university in Oxford or Cambridge next year were premature.
"There's been a bunch of things thrown out there but none of the ones I've heard are true," he added.
(Reporting by Nick Mulvenney; Editing by Tony Jimenez/Peter Rutherford)
