The 30-year-old Egypt forward only had a year left on his previous deal and there had been doubts about whether he would stay.
He said: “I feel great and I am excited to win trophies with the club. It’s a happy day for everyone. We are in a good position to fight for everything.”
Salah has won the Champions League, Premier League, FA Cup, League Cup, Fifa Club World Cup and Uefa Super Cup during his time at Anfield.
Salah has scored 156 goals in 254 appearances during his five years at Anfield since moving from Roma.
