Ki joined Swansea for £5.5 million from Celtic in 2012 but his future at the club looked in serious doubt after he was sent on loan to Sunderland for the 2013-14 season.
But the South Korea international is back in favour under new manager Garry Monk and scored in his side's surprise 2-1 win at Manchester United on the opening day of the season.
He has played the full 90 minutes in both of Swansea's Premier League fixtures this term - they followed up their victory at Old Trafford by beating Burnley - and said he was excited after committing his future to the Welsh outfit.
"I'm very pleased," Ki told the club's official website.
"This is what I have wanted to do - my first option was always to renew with Swansea.
"I am very pleased with all of the players and staff at the club, so I am very happy to sign a new contract.
"I want to sacrifice myself for the team and, as always, do as much as I can to help this team improve.
"I will be giving 100 per cent, and I am looking forward to continuing my work with the club."
"There are a lot of differences in just one year," he added.
"I needed to grow as a player and I have more confidence since returning. This year I want to show much I have grown.
"We work very hard in training. I know the manager very well and he knows me. He knows my strengths and weaknesses and I can learn from him.
"He wants us to be very organised and disciplined. I like the way he manages, so I think we will improve a lot under him.
"This team has a great potential, and I am sure that we will be amazing as time goes by.
"In my first season [at Swansea], we finished ninth. But this year, I think we can go further. I want to make sure we improve."
