A new theoretical model of grammatical picture generation called extended 2D context-free picture grammar (E2DCFPG) generating rectangular picture arrays of symbols is introduced. This model which allows variables in the grammar and uses the squeezing mechanism of forming the picture language over terminal symbols, is an extension of the pure 2D context-free picture grammar (P2DCFPG)[13]. The extended picture grammar model E2DCFPG is shown to have more picture generative power than the P2DCFPG and certain other existing 2D models. Certain closure and other properties of this new model are also examined.