The 26-year-old, who has formed an impressive partnership with the equally highly-rated Mats Hummels, is now contracted to the Bundesliga side until June 2018.
“I’m extremely happy about my decision to stay with BVB,” he said on the club website.
“Dortmund has now become my second home. I’m now looking forward to a successful future with our team and our fantastic fans behind us. We have a great deal to do in the immediate future, and I want to make a big contribution.”
Subotic moved from Mainz to Dortmund in 2008.