The 23-year-old France-born attacker, who has been in great form this season, has ended speculation about his future by inking a two-year extension with the Mestalla side
The 23-year-old's previous agreement ran until the summer of 2014, but he has now signed on for two additional seasons.
Feghouli, who is a product of the Grenoble youth academy, joined Valencia ahead of the 2010-11 campaign and has developed into a valued first team member after a difficult start at the Liga outfit.
The attacking midfielder has made 22 appearances for Valencia this term, scoring six goals in the process.
Feghouli is due to join up with Algeria's national side in the upcoming days as they prepare for the Africa Cup of Nations.