Craig, who played his junior rugby with Heworth, made his first team debut for the Knights against Keighley last month, and impressed suitably to be offered a deal at the Huntington Stadium.
General Manager Ian Wilson said: “Tyler has made significant improvements to his game over the last 12 months in particular. He has worked very hard on his conditioning and is developing into a great athlete. We believe that over the next couple of seasons Tyler will become a first team regular at the club and it is great to see another local player join the first team squad.”
Scrum half Craig was part of the recent Lions tour of Lebanon, and he scored two tries and three goals in the tour opening 40-0 victory over Lebanon Espoirs.
He added: “It is fantastic to be given the opportunity to enhance my playing career as part of the first team squad. I have really enjoyed this year and feel like I have come on leaps and bounds. I’d also like to thank Chris Thorman in particular for supporting me over the last couple of years both at York College and at the Knights.”