The German's deal was set to run until the summer of 2014 but he will now stay at the club until at least 2016.
Grosskreutz said that signing a new deal was easy because of his love for the club.
"I'm happy playing for the Yellow-Blacks," the 24-year-old said.
"Borussia Dortmund have always come first for me and I'll give everything I've got to be successful with this club. I was, am and remain a Borusse."
Grosskreutz has scored one goal and provided two assists this season.