Skrtel, 30, would have been a free agent next summer if terms had not been agreed on a new contract, but talks were prolonged as the defender held out for a suitable deal.
The Slovakian international branded Liverpool’s first offer “unacceptable” last month, raising fears that he could exit Anfield after a seven-and-a-half-year stay at the club.
His agent did however admit it was “likely” a deal would be struck a fortnight later, with his client having rejected interest from Italian side Inter Milan.
Now he has signed his new contract he will compete with the likes of Dejan Lovren, Kolo Toure and Mamadou Sakho for a place at the heart of Brendan Rodgers’ defence.
The news comes after an announcement earlier on Friday that midfielder Jordan Henderson has been chosen as Liverpool’s new captain, succeeding Steven Gerrard who has moved to Major League Soccer side the LA Galaxy.