The 25-year-old England playmaker had been linked with a move away from Villa Park this summer but announced he is staying on the club's social media.
Grealish has been with his hometown club since he was eight-years-old, making his debut in the 2013-14 season.
"It is my club, my home and I am very happy here," Grealish said after agreeing the new contract on Tuesday.
The attacking midfielder, who made his first appearance for England against Denmark last week, has signed a contract until 2025.
"We are determined to build a top team around him and are delighted he is extending his contract and committing himself to the club he loves," Villa chief executive Christian Purslow said.
Villa begin their Premier League campaign at home to Sheffield United on Monday after Grealish played a key role in the club retaining its place in the top flight last season.
He made 36 league appearances during 2019-20, scoring eight goals including in the 1-1 draw against West Ham United which secured Premier League survival on the final day of the elongated season.
"The owners have made it very clear to me how ambitious they are and how they want to build Aston Villa. There are exciting times ahead and I am very glad to be part of it, " Grealish added.