The talented midfielder has sealed a new deal with the Andalusians, which binds him to the club until 2016 and puts an end to transfer speculation regarding his future
In recent months the youngster has been linked with a number of clubs, with the likes of Tottenham, Chelsea and Bayern Munich reportedly interested in acquiring his services.
However, Isco is happy with his decision and confident that Malaga will continue to blossom over the next three years.
"It's a big step for me and for Malaga. I'm grateful because they bring me to my city," the 20-year-old told reporters.
"I have trust in this team and I think we will continue improving this year, and that's good for me and for the club.
"I'm happy to have renewed. What happens in the future nobody knows. Nobody has contacted with me, these are rumours and run every day. It isn't the time to talk about it now."
The club's sporting director Mario Husillos also expressed his delight at reaching an agreement with the player and his decision to stay at the club.
"The player has always been very clear that the only option was to stay at Malaga. There have been offers from other clubs, but the main thing for me is he continues in Malaga."
Isco has scored seven goals in 25 appearances in all competitions this season.