The Brazil international moved to Stamford Bridge in January 2011 in a £21 million deal from Portuguese side Benfica.
Having been linked with a switch to Barcelona in the summer, the 25-year-old, who won both the Champions League and the FA Cup with Chelsea last season, has ended speculation regarding his future by committing his long-term future with Roberto Di Matteo's side.
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"I am very happy to sign a new contract with Chelsea," Luiz told the club's official website.
"It is a great club and I look forward to winning more trophies here. I want to play for a long time at the top level - which is what playing for Chelsea means.
"I love everything about the club and especially the fans, who have made me very welcome and given me great support."