The Reds have not mentioned the length of the contract in their official statement, but The Athletic suggests it is a three-year deal.
The forward is set to earn £350,000 per week as per the same reports, making him the highest-paid player at Anfield.
Salah has been at Anfield for the last five years and has been a vital part of Jurgen Klopp's starting XI. He has scored 156 goals in 254 matches for the Reds since joining from AS Roma in 2017. He has helped them end their Premier League drought and also won the Champions League, among other trophies.
Mohamed Salah speaks after signing the new Liverpool deal.
Salah spoke to the club's official website after signing the new contract and claimed he felt great at the club.
He added that he is excited to win trophies at Anfield and said:
"I feel great, and [I am] excited to win trophies with the club. It's a happy day for everyone. It takes a little bit of time, I think, to renew, but now everything is done so we just need to focus on what's next. I think you can see in the last five or six years the team was always going [upwards]."
"Last season we were close to winning four, but unfortunately in the last week of the season we lost two trophies. I think we are in a good position to fight for everything. We have new signings as well. We just need to keep working hard, have a good vision, be positive and go for everything again."
Salah is now set to stay at Anfield and will look to help Liverpool win more trophies.
Paul Merson predicts Man City vs Man Utd, Arsenal vs Tottenham and other GW 9 matches! Click here