The controversial forward signed a short-term contract with the Elland Road side in September but has extended his stay having impressed in the Championship this season
Diouf has scored five goals in 24 games for the Yorkshire club this term, helping them to 14th in the English second tier.
The Senegalese attacker moved to Elland Road on non-contract terms in August before signing a short-term extension the following month but has now committed his future.
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"Obviously it's a massive boost for everyone knowing that we are going to have him around, he's a match-winning player."
Diouf, whose previous clubs also include Bolton and Blackburn, arrived in England with Liverpool in 2002 following several impressive showings in the World Cup.