Sky Sports revealed earlier on Tuesday that the Uruguay international was poised to agree fresh terms with the Reds.
An agreement has now been thrashed out, just 24 hours after Suarez re-joined the Reds fold following his involvement at the 2012 Olympics.
New Anfield boss Brendan Rodgers has convinced the 25-year-old that he is in the perfect place for his career, bringing to an end any uncertainty regarding his future.
Suarez insists he was more than happy to put pen to paper just 18 months after arriving in England on a five-and-a-half-year deal from Ajax.
“To sign a new contract with Liverpool is unbelievable for me because I am so happy here at both the club and also in the city,” he told the Reds’ official website.
“That is important for me and I am very happy with my new contract.
“To sign a new contract with Liverpool is unbelievable for me because I am so happy here at both the club and also in the city.”
Luis Suarez Quotes of the week
“When you are a kid, everybody wants to play for Liverpool. I am here now and it is a dream for me, and now I am a Liverpool fan.
“I am happy off the pitch because the people of Liverpool are good with me and my family. I try my best on the pitch and when you are happy off the pitch, you are happy on the pitch.
“I want to say thank-you to the fans because they are our 12th player. The supporters of Liverpool are unbelievable.
“Five or six years ago I watched on TV the stadium and the club, and now I play here and the supporters have helped me. That’s very important for me.”
Rodgers added: “I’m delighted. When you have the opportunity to work with world-class players it’s fantastic.
“There were certainly a few clubs who were interested in him but over the off-season he and I communicated well – and he’s committed himself for the long term here now.
“He’s really looking forward to playing in this way of working. As a manager and for the supporters, I’m delighted because I know how important he is for them.”