The striker, who has been in stunning form for the Anfield side recently, scoring eight times in his last three games, has agreed a four-and-a-half year deal that runs until 2018.
It had been thought talks would continue throughout the season as the player waited to see whether Liverpool would secure a Champions League place for next season.
However, Liverpool announced that a deal had been done. Suarez said: "Without doubt, the backing I have received from the Liverpool fans has influenced my decision. I am so proud to represent them and go out to do my best for them every time I pull on the shirt."