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The 29-year-old's previous deal expired this summer but the new agreement will keep him with the Florence club until June 2019.
"I am really happy to have extended my contract for a further five years," Valero told the club's official website, www.acfiorentina.it. "The Viola club has given me so much and as a return I've given them so much.
"In the past few months I told my agent that I didn't want to hear any other offers as I waited to receive one from Fiorentina.
"Fiorentina is the team alongside Real Madrid that has given a lot in my career.
"My family is very happy in Florence and for me this is crucial. To live in Florence is a dream.
"I joined this club three years ago and each year the team has grown. I believe it will be the same next season."
Valero, who was a product of Real Madrid's youth academy, moved to Tuscany from Spanish side Villarreal in the summer of 2012.
He scored six goals in 31 league appearances to help the Viola finish fourth in Serie A last season and qualify for the Europa League group stages.