The 20-year-old has been rewarded for his exceptional form this season with a year-long extension to his current deal to keep him at the club until 2018.
The 20-year-old has been the standout player for the Rossoneri this season, notching 18 goals and four assists in his 33 games to date in all competitions.
El Shaarawy's electric early-season form saw him linked with the likes of Manchester United and Manchester City, but he has quashed any suggestions he may be tempted to quit the club by extending his current deal until the summer of 2018, with Milan confirming the news on its official website.
Reports emerged at the end of January that progress had been made on a new deal for El Shaarawy, with his agent Roberto La Florio revealing at the time that talks would likely begin imminently.
The Italy starlet joined the San Siro side in the summer of 2011 from fellow Serie A side Genoa, and he has been crucial to Milan's efforts to rebuild the squad following wholesale changes last summer, with his goals helping to propel the side back into contention for a top-three finish this season.