The 25-year-old winger, who has been at the Liberty Stadium since 2009, believes the Swans are a club full of ambition and has backed the south Wales outfit to progress
The 25-year-old joined the Swans on a permanent basis in 2009 from Southampton, and has gone on to make 197 appearances for the club in all competitions.
Dyer was part of the Swansea squad that earned promotion to the Premier League under Brendan Rodgers, and netted twice in the Capital One Cup final victory over Bradford.
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“I’ve been here four years now, and I wanted to stay at Swansea,” Dyer told the club's official website.
“I didn’t even think about going anywhere else, so it is nice to get it all sorted. We’ve made a lot of progression here as a club, and I feel I have progressed too.
“I am still trying to improve as a footballer and I feel I can do that here. I think the club can continue to improve. We have made some quality signings and the squad strength is very strong now.
“You look at the potential of the club when you are making key decisions like this, and I don’t see the club going downhill in anyway. I can only see it going up and up.”
Dyer scored three goals and provided six assists in 37 Premier League appearances last season, and netted three goals in five Capital One Cup matches as Swansea claimed the first major title in the club's history.