The 30-year-old was rumoured to be weighing up other options heading into the final months of his existing contract at New Road, where he has played his cricket since joining from Warwickshire in 2007.
Moeen insists that he was more than happy to end the speculation over his future by putting pen to paper on fresh terms, however, which he expects to keep him at Worcestershire for the remainder of his playing days.
"It's happy days. To commit my future and probably the rest of my career to Worcestershire is a fantastic feeling," he told the club's official website.
"I've been part of this club now for a very long time. We have some brilliant young players, probably the best young English players in the country. It is a fantastic club and they have always been good to me and supported me and I'm delighted to sign."
Director of Cricket Steve Rhodes added: "Moeen is our England player and it's important for us to have an England player. It's also important for our dressing room, our players, our staff and our members and supporters and everyone involved at the club.
"It sends a message to other clubs that our better players don't feel the need to be elsewhere. They want to be on this journey to success and in Moeen's case, he has stayed loyal to the club in signing this longer deal."
Moeen has played 129 times for England in all formats in the three years since making his debut, taking 128 wickets and recording five centuries.