The Austria international has signed a new contract that is set to expire in 2018, declaring himself "very, very happy" to have committed his future to the Bavarian giants
The 21-year-old moved to the Allianz Arena as a teenager from Austria Vienna in 2008 and has sealed his place in the Bavarians' first team at left-back over the last two years.
His preference for a midfield role had led to some speculation that he might leave but the Austria international has now committed his future to the club.
"I am very, very happy," he told the club's official website. "I have been at Bayern since 2008, they have become my club. I am lucky that everything is now fixed and that I can play for this club until at least 2018."
Bayern CEO Karl Heinz-Rummenigge added: "These were pleasant talks. We are very happy that they have led to this nice ending for both sides.
"He has developed wonderfully on the pitch. The coach is very happy, we are very satisfied. David has made a great contribution to what we have achieved this year.
"David came to us at 16 and has developed a lot. He is one of Europe's best and most successful full-backs already. We are happy we can count on him and his performances further.
Sporting director Matthias Sammer, meanwhile, is looking forward to seeing Alaba develop further as a player over the coming years.
"At 21 years of age, he's not yet mature," he observed. "This signal from David is very important for going on with us."