The 29-year-old had been linked with a move away from the Florence club amid uncertainty as to whether he would sign a new contract.
Valero has now extended his deal at Stadio Artemio Franchi until 2019 however, and said it was never his intention to leave the Serie A club.
"I am very happy to have extended with Fiorentina for another five years," Valero told reporters at the club's pre-season training camp.
"The club have always given me so much and I have looked to give so much [back] to them. A few months ago I told my agent not to listen to any other offers [as] I was waiting to receive one from Fiorentina.
"Fiorentina are the team that have given me the most, together with Real Madrid. My family is happy in Florence and this is crucial for me.
“Maybe I am a strange player. My life off the pitch is simple. Florence gives me tranquillity. Living here is a dream.
“Do I believe in the club's project? I arrived in Moena [two] years ago and we have grown each year.
"Could I then become a director at the club? I'm too young to think about that."
Valero's decision to sign a new deal is a further boost for Montella after defender Gonzalo Rodriguez also put pen to paper on a new contract.