The Belgium striker stunned Villa earlier this month by asking to leave just one year into the four-year deal he signed on arrival from Genk last summer.
But after holding training-ground talks with manager Paul Lambert, Benteke has instead signed a new deal which ties him to the club until 2017.
He told the Villa website: "I spoke with the manager when I returned to training and we had a good talk.
"I am very happy to be back here in Birmingham and at Aston Villa, and to sign a new contract. This is a great club and it has given me a lot. Now I have to give back to my team-mates and the fans who have always been right behind me."
Benteke's 19 league goals last season played a key role in Villa's survival and led to speculation over a summer move to Tottenham.
He said: "The end of last season was very good and the lads were very strong. It was not easy but we came through it and the confidence is high. So everyone knows what we have to do now - be better. I need to be better than last year."
Lambert said: "I had a full and frank discussion with Christian Benteke on his return to training this week regarding his future. It is my opinion that the best thing for Christian is to remain at Aston Villa.
"I'm delighted, having time to re-evaluate his future, Christian has decided to commit to the club. It's a huge bonus and I'm sure the supporters are every bit as delighted as me to have him on board and raring to go."