The former Liverpool and Blackburn player originally moved to Elland Road on a non-contract basis in the summer before signing a deal until January.
United manager Neil Warnock has been delighted with Diouf's influence on the pitch, where he has scored five goals since his arrival.
The 31-year-old is now contracted to the West Yorkshire giants until the end of the summer of 2014.
Warnock said: "We're delighted he's agreed everything and hopefully he'll enjoy the next 18 months with us.
"Obviously it's a massive boost for everyone to know we're going to have him around, and this is what we've wanted to do.
"He's a match-winning player, and there aren't many of them around. He's a player who can change a game and I'm delighted we've been able to keep him. He's also fitted in really well, and he's been great with the lads."






