The attacking midfielder has been repeatedly linked with a move away from Signal Iduna Park in recent seasons, most notably to German champions Bayern Munich.
However, Reus has given Dortmund a significant vote of confidence by signing a new contract, with the club 16th in the table.
"I am very happy with my decision to sign a new deal with BVB," said Reus, who has scored 34 goals in 72 league appearances. "Dortmund is my hometown, and to choose Borussia was easy.
"I look forward to a successful future with our team with our fantastic fans behind us."
Sporting director Michael Zorc added: "Marco Reus could change the world with almost every top club.
"He has shown that his heart beats for his hometown and for his hometown club by his decision.
"He is a very important component for Borussia Dortmund's sporting future."
While Dortmund CEO Hans-Joachim Watzke said: "We refused to believe all the transfer rumours and always felt there was a good chance that this extraordinary player would commit his future to BVB.
"Marco can define an era in Dortmund as Uwe Seeler did in Hamburg or Steven Gerrard in Liverpool.
"The fact that Marco made this decision in the midst of a sporting crisis at BVB shows how much he identifies with the club and that makes us very proud.“
Reus, who missed Germany's World Cup triumph through injury, has endured a career of nearly moments at Dortmund, finishing runner up in the Bundesliga, UEFA Champions League and DFB-Pokal.
Despite abysmal form domestically this term, Dortmund have been impressive in Europe and face a two-legged last 16 tie against Juventus in the Champions League.
