The 23-year-old midfielder joined the Hoops from Israeli club Maccabi Haifa last summer.
"I'm very happy to sign this new contract with Celtic," Kayal told the club's official website. "I came to Celtic last season and I've enjoyed it very much. I feel at home here and I want to be at the club for a long time.
"The fans have been magnificent and I want to thank them all for their support. I will do everything for the club and the manager to achieve success.
"It was the manager who wanted me here and I want to achieve things for him, the club and all our supporters."
Kayal has scored two goals in 40 appearances since arriving at Celtic Park.