Recent reports had suggested that both Chelsea and Manchester City had been monitoring the 19-year-old's situation at Villa Park.
However, the attacking midfielder has put an end to that speculation by agreeing to terms that have tied him to Villa until the summer of 2018.
"I'm delighted and it's a dream come true to commit my future to my boyhood club," he is quoted as saying by the club's official Twitter feed. "I've had a season ticket at Villa since I was four-years-old and came to every game, so this is a big thing for me and my family."
Birmingham-born Grealish has made three appearances in all competitions this season.