Martinez claimed last year he had an offer to join the European champions, while Racing criticised Atletico in December after the Liga club allegedly gave the striker a medical without permission.
The 20-year-old is regarded as one of the brightest prospects in South American football, earning Argentina youth caps and scoring 13 Superliga goals over the last two seasons.
Amid continued speculation linking Martinez with a move to Europe, Racing confirmed on Thursday the player has signed a new contract with the club, clarifying that his wages and exit clause have gone up.
"I always said that I wanted to stay and here I am," Martinez said.
"I want to fight for the Copa Libertadores."
Racing are mid-table in the Superliga after 12 games, Martinez having scored three goals in his last four games, including in a 2-1 win at leaders Boca Juniors.