The 22-year-old will now remain with the Bombers until at least the end of 2015.
"I am really excited to have been given the opportunity to sign on for a further two years with the club," Colyer said in a statement.
"There were opportunities to continue my career elsewhere, but there are a lot of good people at Essendon and I want to be a part of the club and its push for success moving forward."
Colyer has played 34 games in his four seasons at the Bombers, including seven in 2013.
Essendon list manager Adrian Dodoro said Colyer's re-signing showed players were keen to stick with the club, despite the tumultuous events of the past season.
"We are continually building our list and want to see our younger players relish their senior opportunities," Dodoro said.
"Travis turned down longer term offers from other clubs to stay loyal to Essendon and this is a further sign of our players wanting to stay at the club.
"We hope Travis can have a big pre-season campaign and develop his game further to consolidate his spot in the senior side moving forward."