Henderson has emerged as a key figure under Reds boss Jurgen Klopp and the new deal is a reward for the England midfielder’s fine form.
The 28-year-old has made 283 appearances for Liverpool, scoring 24 goals, since arriving from Sunderland in 2011.
He took over the Liverpool captaincy from Steven Gerrard in 2015, leading the team to last season’s Champions League final.
With the deal reported to be for five years, Klopp hailed Henderson’s contribution under his management.
“It is fantastic news but should not be a surprise to anyone – he is perfect for us and we for him, I think,” Klopp said.
“Jordan embodies entirely what it means to be a Liverpool player in this modern era of football.
“You can tell through his actions on and off the pitch he treats representing our badge and our shirt as a privilege.
“He takes nothing for granted and strives to learn and be better for his team at all times.
“He carries a lot on his shoulders that people on the outside won’t see, but he embraces that responsibility and that leadership. He is our ‘General’ and I trust him completely.”
After being rested following England’s run to the World Cup semi-finals, Henderson made his first start of the season in Saturday’s 2-1 win at Leicester which ensured Liverpool’s best opening to a campaign since 1990-91.
“It doesn’t seem like too long ago when I signed my first one – it feels like yesterday, really – but a lot has happened since then,” Henderson told Liverpool’s website.
“I feel it’s been a progressive journey for me throughout my time here and one I’ve enjoyed so much.
“There is no other place in the world I would rather play football. I want to be here for as long as I can be.
“I’m so privileged to have been a part of this club for so long, and hopefully even longer now