The Poland captain had become a top target for several European clubs this summer following his performances at Euro 2012, but he has now shown his commitment to last season's German league and cup double winners by putting pen to paper on a new deal.
"I am very happy to be remaining in Dortmund," he said.
"There are not many clubs who have so many fans and who have achieved what we have done over the past two years.
"I am very happy about this new contract."
Blaszczykowski joined Dortmund from Wisla Krakow in 2007 and was a major component in the side which dominated in Germany last season.
"I played the way I want to play, and that is how things should continue," added the 26-year-old on the Westphalian club's website.
"We want to do better in the Champions League too, and we have the quality for it."
Despite winning the domestic league and cup, Dortmund crashed out of the Champions League in the group stage after suffering a similar fate in the Europa League in the previous season and that is one thing Jurgen Klopp's side will be looking to change this season.