The Uruguayan has enjoyed a sensational 2013, scoring 27 times in 25 games, while he has netted 17 times in just 11 Premier League matches this season.
Goal reported earlier this week that Liverpool had opened talks with Suarez over a club-record deal and the 26-year-old has now put pen to paper.
"I am delighted to have agreed a new deal with Liverpool and have my future secured for the long term," Suarez told the club's official website. "We have some great players and the team is growing and improving all the time. I believe I can achieve the ambitions of winning trophies and playing at the very highest level with Liverpool. My aim is to help get us there as quickly as possible."
Suarez made no secret of his desire to leave the club during the summer, with Arsenal failing with two bids during the transfer window after being led to believe an offer of over 40 million pounds would trigger a release clause.
However, the 26-year-old insists the "special relationship" he has with Liverpool supporters has persuaded him to commit himself to the Anfield outfit.
"Without doubt the backing I have received from the Liverpool fans has influenced my decision," he continued. "I am so proud to represent them and go out to do my best for them every time I pull on the shirt.
"We have a special relationship. They have love for me and in return I love them back. I will always do my best for them and hopefully we can achieve success together."