The Uruguayan has been in stunning form for the Reds recently, after a turbulent summer in which he suggested the club had reneged on an agreement to sell him if they failed to qualify for the Champions League.
It had been expected that talks would continue throughout the season and the received wisdom was that the player would want to wait and see whether the Reds secured a Champions League place for next season, but the club on Friday confirmed he had signed a new deal.
Suarez told the club's official website: "I am delighted to have agreed a new deal with Liverpool and have my future secured for the long term," Suarez told the club's website.
"We have some great players and the team is growing and improving all the time. I believe I can achieve the ambitions of winning trophies and playing at the very highest level with Liverpool. My aim is to help get us there as quickly as possible.
"Without doubt the backing I have received from the Liverpool fans has influenced my decision. I am so proud to represent them and go out to do my best for them every time I pull on the shirt.
"We have a special relationship; they have love for me and in return I love them back. I will always do my best for them and hopefully we can achieve success together."
Liverpool manager Brendan Rodgers said the new deal was a huge boost for the club.
"This is fantastic news for everyone associated with the club; the team, the owners and most importantly the supporters.
"Luis is a world-class talent and securing his services is crucial for what we are trying to achieve here.
"What's most important and most exciting is that, at just 26 years old, his best years are still ahead of him and we now know we'll be seeing him reach that potential in a Liverpool shirt."
Principal owner John W Henry said the new deal proves Liverpool are progressing on and off the pitch.
"We are committed to working hard to keep our best players and this is an indication that we are moving in the right direction and moving at a pace that impresses one of the best players in world football," he said.
"The club has made major strides forward in recent years and we are all committed to delivering the success our supporters want and deserve."
Liverpool chairman Tom Werner said: "This demonstrates our commitment, as an ownership group, to building a team that competes at the highest level both in the Barclays Premier League and in Europe.
"Our primary motive is to do what is best for Liverpool Football Club and today's news is another significant step forward on this journey."
I wonder what part captaining him in Gerards absence played in his signing so quickly. Shrewd move that can't have hurt. No flies on Rodgers. After years of abuse I have levelled at my Liverpool supporting mates I have to give them their dues. This chap is utter genius. There are only 4 players in the world for me that when watching I am thinking they could show me something that I have never seen today on a football field. That little bit of unforseen brilliance. Messi, Ronaldo, Zlatan & Suarez. His goal last year against Newcastle (i think) where he chests the ball down over his shoulder while on a full sprint, beats krul with a just as ridiculous second touch and then passes it in with his third touch was complete instinctive magic. It was reminiscent of Bergkamp in his pomp - beyond the relms of sterotypical world class skill. Unstoppable.- crookster