Verstappen, 22, will now remain with the former world champions until the end of the 2023 campaign.
Here, the PA news agency looks at the key questions surrounding Tuesday's surprise announcement.
Is Verstappen's new deal a coup for Red Bull?
The simple answer is yes. Behind Lewis Hamilton, Verstappen is the most sought-after driver in Formula One. Verstappen had 12 months to run on his previous Red Bull contract and would have been forgiven for exploring his options. While Red Bull and their new engine partner Honda enjoyed a steady campaign in 2019, with Verstappen winning on three occasions, they remain the sport's third best team behind Mercedes and Ferrari. Hats off to Red Bull for convincing Verstappen to stay put.
Why have Red Bull acted so quickly?
All of the major players – aside from Charles Leclerc, who last month signed a five-season deal with Ferrari – are out of contract at the end of this year, and Verstappen's future had been a hot topic for debate. With Hamilton refusing to rule out a move to Ferrari in 2021, there is no question that Mercedes would have made Verstappen their number one candidate to replace Britain's six-time world champion. But after locking Verstappen into a new deal two months before the start of the new season, Red Bull can now sit back and relax, safe in the knowledge that their star driver is staying for at least another four years.
Where does Verstappen's new deal leave Hamilton?
With Verstappen off the market, and Leclerc committing to Ferrari until 2024, Hamilton will begin his next round of contract talks well aware that Mercedes cannot afford to lose him. That can only strengthen Hamilton's position as he bids to improve his eye-watering £40million-a-season package. But Verstappen's extension also signals that Red Bull do not want the Briton, and would Ferrari want to replace Sebastian Vettel with another alpha-dog, and thus risking another chapter of the intra-team rivalry which has provided them with a major headache since Leclerc joined last season?
When will Hamilton make a decision on his future?
Ferrari and Red Bull have acted quickly to tie down Leclerc and Verstappen, who, both aged 22, are the sport's two biggest young stars. Hamilton turned 35 on Tuesday, but do not expect an announcement on his future any time soon. Hamilton can afford to bide his time, while he has also indicated that the future of Mercedes team principal Toto Wolff will play a pivotal role in his decision. The Austrian is yet to commit to Mercedes long term and has been linked with moves to run Formula One and Ferrari.