The new five-year deal will keep the 25-year-old at Stamford Bridge until the summer of 2017.
"I am very happy to sign a new contract with Chelsea," Luiz told the club's official website.
'It is a great club and I look forward to winning more trophies here.
"I want to play for a long time at the top level which is what playing for Chelsea means.
"I love everything about the club and especially the fans, who have made me very welcome and given me great support."
Luiz joined Chelsea from Benfica in a deal worth around £21million 19 months ago.