Yes, it's possible.
You need USB drive with more than 256GB that supports USB 3.0.
Once connected, you should go to Settings > Devices > USB Storage Devices on your PS, and then select Format as Extended Storage.
After that to change default storage for your games and other downloads you can go to Settings > Storage , press Options and select Application Install Locations.
To move existing games/application go to Settings > Storage > System Storage > Applications , select your game, press Options and select Move to Extended Storage.
While it was not asked specifically, I personally think that it may be worth considering changing internal HDD to SSD instead - you will gain both extended storage and performance boost (better loading times). Also you won't have USB always sticking from your console. SSD is more expensive for sure, but if you decide to go that direction, this guide (Upgrade PS HDD) will help.
Actually, looks like external storage may grant better loading times too - see PS4 External Storage Tested.