The 22-year-old winger has penned his second contract inside 12 months, with two years being added to his current deal and a new buyout clause standing at €25 million (£21.3m)
The 22-year-old put pen to paper on a new deal earlier this year but the Blaugrana have rewarded the winger again in a bid to increase his buy-out clause, which now stands at €25 million (£21.3m).
Tello is a product of the club's famed La Masia youth system and made 29 appearances for the club last season and made his first outing of the new campaign in the 7-0 romp over Levante.
And he admitted his aim is to now become a firm fixture in coach Gerardo Martino's plans over the course of the next five years.
"I'm very happy to have renewed," he told the club's official website. "It's a dream to be able to stay for so many more years at this club.
"I hope things remain as good as they are and that I can get to play. I'll be taking all the chances the boss gives me and trying to do my best."
Tello faces renewed competition for a first team spot at Camp Nou, with the club adding €54m (£46.1) signing Neymar to their attacking ranks this summer.