The 23-year-old winger was snapped up by the German giants from Werder Bremen in the summer of 2017.
Amid fierce competition for places at the Allianz Arena, he was allowed to spend the 2017-18 campaign on loan at Hoffenheim.
He thrived during that spell, breaking into double figures when it comes to goals scored for a second successive season, and did enough to convince those in Munich of his worth.
Gnabry has been welcomed back into the fold this term, finding the target eight times in 29 appearances across all competitions, and is considered to be an important part of Bayern’s future.
“He has taken a big step forward in his first season with us.
“Serge is one of our young guns and an important part of FC Bayern. We are confident that we will have a lot of fun with him.”
Having established himself within Niko Kovac’s plans and earned fresh terms, Gnabry is hoping to help Bayern chase down many more major honours in the years to come.
He said of his future: “I feel very, very well here. It's a lot of fun with the team.
“Of course, I hope for many titles and great moments - and look forward to a good future with Bayern.
“Personally, I am currently doing very well, but I know that I still have potential and need to develop further.”
Gnabry, who spent time with hometown club Stuttgart in his youth, made a professional breakthrough in England with Arsenal.
Opportunities were to be limited, though, with the Gunners and he returned to his homeland at Bremen in 2016.
Rapid progress has been made since them, with his switch to Bayern complemented by five senior international caps and four goals for Germany.