The 29-year-old had two years remaining on his existing contract but has now resigned for a further two years as part of an agreement that will allegedly see his release clause increased to a staggering €1 billion (£890m).
Benzema has been the subject of long-term transfer links to Arsenal, with a story in the Spanish press as recently as this morning claiming that Madrid were considering offloading the Frenchman to the Gunners for £44m.
In a short statement confirming the news, Madrid said: "Real Madrid CF and Karim Benzema have agreed an extension to the player's contract, binding him to the club until June 30, 2021. Tomorrow, Thursday, at 2pm CEST, Benzema will speak to the media in the press room at the Santiago Bernabeu."
Benzema joined Madrid from Lyon in 2009 and has since gone on to score 181 goals in 371 appearances, winning two La Liga titles, three Champions Leagues and two Copas del Rey.