The Dane, who was signed by Rafael Benitez from Brondby in 2006, committed his future to the Reds on Friday morning.
The 27-year-old had reportedly attracted interest from Manchester City over the summer, though a move failed to materialise after the Premier League champions opted to sign Matija Nastasic.
After signing, Agger told the club’s official website: "It means everything to me. This is where I want to be and I'm happy the club want me. I am really happy right now. I've never wanted to go anywhere else.
"I feel I am a part of this club - and I want to be a part of this club in the future.
"I like the way it is going right now with the style we're playing, and hopefully the results will come soon as well.
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"The support from the fans has been unbelievable. The game when they were singing all the songs about me, it was difficult to focus on the game!
"It was such a good experience for me and I'd never experienced anything like it before. That is why I am so happy here. That for me is Liverpool Football Club.
"I feel I belong here and as long as the manager and the owners want me, I'll be here."
Reds managing director Ian Ayre also expressed delight that the Denmark international would be adding to his 177 appearances for the Merseyside club.
He said: "Daniel's contribution since joining the club in 2006 has been absolutely fantastic and his loyalty to the team is recognised by the deal he has signed today.
"Daniel always made it clear he wanted to stay at Liverpool and we're delighted that he's committed his future to the club.
"We brought in some very exciting players this summer - some of whom chose Liverpool over clubs in the Champions League.
"But it's equally important to retain your most important players and the fact that Daniel has now followed Luis Suarez, Martin Skrtel and Jonjo Shelvey in signing a new contract is testament to the fact that the players believe in what we're trying to achieve here under Brendan Rodgers."