There was initial uncertainty over whether the Spaniard would remain at Anfield but following his emergence in the first team under manager Brendan Rodgers, the 18-year-old has insisted that he didn't have any doubts.
"I am really happy," Suso told the club's official website. "Liverpool are one of the biggest clubs in the world and this is the right place for me. I am happy Brendan has shown trust in me. I had no questions about signing a new deal and I am really glad to have done so.
"I am comfortable here. I have played some games for the first team and I hope to continue doing that, but I need to work hard every day for that to happen. This is one of the best days of my life."
Rodgers added: "We are all delighted Suso has committed his long-term future to Liverpool Football Club. At 18, he has demonstrated outstanding technical qualities but also shown very good temperament to play for such a prestigious club."
Suso joined Liverpool's youth team in 2009 and has since made four first-team appearances for the Reds.