The Brazilian joined from Almeria ahead of the 2011-12 campaign and his previous deal had been set to expire in 2015.
"Valencia are pleased to announce the reaching of an agreement with goalkeeper Diego Alves to extend his contract at the club through to June 30, 2019," read a statement on their official website.
"Diego Alves [...] participated in a total of 35 games in the most recent campaign.
"He was chosen by fans on the club's official social networks as the best player of the 2013-14 season."
Alves remarked: "My first contract was for four years and I knew that, if I did well, I could get a renewal.
"I think it comes from the three years I've had here, the fans have always been really good with me and they've supported me. That has helped me adapt. I feel very happy here and from there, that makes everything easier for me."
Valencia appointed Nuno Espirito Santo as their new coach earlier this summer after the club's new board opted to part company with previous boss Juan Antonio Pizzi.