There were questions about the forward from Egypt, whose previous contract had only one year remaining.
The 30-year-old is now the highest-paid player in the history of the club according to the deal, which pays him more than £350,000 per week.
"For our fans, this is a fantastic treat that will make their weekend even better. There will undoubtedly be some festivities tonight in honour of this news."
"I feel great and I am excited to win trophies with the club. It's a happy day for everyone. We are in a good position to fight for everything." Mo salah
he has scored 156 goals in 254 appearances during his five years at Anfield since his £36.9 million moves from Roma.
At Liverpool, he also earned or shared three Premier League Golden Boots and twice received the PFA Player of the Year award.
The renewal comes as a huge relief After Sadio Mane's summer departure to Bayern Munich
The Merseyside Reds won the FA Cup and the Carabao Cup this season, but they were on the verge of completing a quadruple until the final week of the season, falling just short in the Premier League and losing in the Champions League final to Real Madrid.
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