The new deal will keep the 21-year-old with the Rojiblancos until the summer of 2018.
“I am happy to give more years to Atletico,” Koke told his club’s official website.
“I am on the team of my life and I cannot ask for more.
“I want to continue working to try bring new success and better achievements than last year. I am very happy.”
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Summer 2016 is set to be a very exciting time for football fans, as this is when the long awaited Euro 2016 tournament kicks off.
Since Guus Hiddink arrived at the helm, Chelsea have improved considerably after a tricky start to the campaign.