The 28-year-old is currently on international duty with Ecuador at the World Cup, and helped his team to a 2-1 victory over Honduras on Friday to keep their hopes alive of progression beyond the group stages.
Valencia has made almost 200 appearances for United since arriving at the club in August 2009, and assistant manager Ryan Giggs is happy the deal has been concluded.
Giggs said: "I'm really pleased Antonio has signed a new contract. His contribution to the team since he joined the club in 2009 has been fantastic.
"Antonio is a very powerful player with great speed and versatility. He is very professional in his approach to training and I am delighted he has committed his future to the club."
And Valencia is relishing the prospect of teaming up with Netherlands coach Louis van Gaal at United following the World Cup.
Valencia said: "My time at Manchester United has been like a dream come true. To be the first Ecuadorian player to win the English Premier League was a very proud moment for me and for my country.
"I am so happy to have signed a new deal and am looking forward to working with Louis van Gaal. There is great team spirit within the club and we are all determined to get back to winning ways."