The Spain forward joined the Liga side on a season-long loan last July with the option of extending his stay at the Mestalla.
Valencia have now exercised their option to retain Rodrigo just a few days after Andre Gomes joined Nuno Espirito Santo's side on a permanent basis from Benfica.
Rodrigo spoke of his determination to fire Valencia into the group stage of the Champions League after playing his part in ensuring they finished fourth in La Liga to seal a place in the final play-off round.
"After a year in Valencia I feel very happy and eager to be better every day. Now we have to think about the Champions League and get into the group stage," he said.
"I've been fortunate to play in this competition with Benfica and now I want to do so with Valencia."
Rodrigo also revealed he is aiming to score more goals next season after finding the back of the net just four times last term.
"My ultimate aim is to help Valencia CF to be better, to achieve all my fitness goals and, above all, for us to be a very competitive team.
"Individually, I hope to have more luck in front of goal, but I'm sure with daily work in training all will be well."