The 28-year-old, who joined PSG from Milan in July 2012, has put pen to paper on deal that will keep him at the Parc des Princes until June 2018.
Thiago Silva has already enjoyed success with the club from the French capital, helping them to their first Ligue 1 title since 1994 in his debut season.
La Liga champions Barcelona - who eliminated PSG from the UEFA Champions League at the quarter-final stage last season - were said to be interested in taking the Brazil international to Camp Nou.
However, the centre-back has committed his future to Laurent Blanc's side as they aim to challenge for further honours in both domestic and European competition.
"We are very proud to extend the contract of Thiago, an exceptional player on and off the pitch," PSG president Nasser Al-Khelaifi said.
"He symbolises PSG's transition to one of the biggest clubs in Europe."
PSG have strengthened significantly in the transfer window, bringing in Edinson Cavani from Napoli to bolster the attack, while Marquinhos and Lucas Digne have added depth to the defence.
Thiago Silva's decision to remain with the club will come as another boost to PSG - who have taken two points from their opening two games this season - after midfielder Marco Verratti signed a new contract on Tuesday.
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