The 21-year-old forward, who was reportedly on Arsenal's radar, will now remain at the Stade de Gerland until 2019.
N'Jie told Lyon's website: "I'm happy. Now we have to continue working. I want to score, to play and I hope we can qualify for Europe next season.
"I'm proud of myself. I want to also thank everyone who helped me get this far. This extension shows that the team has confidence in me."
N'Jie, who is a Cameroon international, has scored three goals in his first two appearances for the Indomitable Lions.