The 21-year-old, a product of the Reds academy, has been rewarded after a successful loan spell at side Hull City last term.
Wilson spent the second half of last season at the KCOM Stadium, where he scored seven goals in 13 Championship matches.
"I'm delighted to sign the new deal," the forward told Liverpool's official website.
"When it got offered to me, I was desperate to get everything sorted so I could sign it fairly early on in pre-season because I want to focus on playing football.
"So, now this is sorted, I feel I can do that and push on and try and impress."
Wilson has also won four senior caps for Wales.