Rafinha, the younger brother of Barca's Thiago Alcantara, is now contracted to the Catalans until the 2013/14 season.
The developement pours cold water on the recent speculation linking the youngster with a move to Real Madrid, although their coach Jose Mourinho can still sign the player if he is perpared to meet the freshly inserted 12 million euros buyout clause. The stipulated figure is until the 2012/13 campaign and it rises to 30 million euros the following year.
Rafinha was quoted on the club's website expressing his "great happiness" at extending his stay at Barca.
Rafinha is currently in his sixth season at the club after arriving from Celta de Vigo and he made his debut for the first team on November 9th in the round of 36 of the King's Cup against L'Hospitalet.
"It's the kind of thing you can't really believe," he said.
"It's been my dream since I came here when I was just 13 years old - it really was a dream come true."
Rafinha was one of five players named in a supposed secret list published by Marca which claimed to reveal Madrid's top youth transfer targets for 2014.