Kroos follows in the footsteps of youth team products captain Philipp Lahm, Bastian Schweinsteiger, Thomas Muller and Holger Badstuber, who have extended their contracts to 2014 or beyond.
"This is an important milestone in the long-term planning for a successful team," said club manager Christian Nerlinger. "We believe Toni will have an amazing development here."
The 21-year-old Germany international returned to Bayern last year after a two-year loan spell at Bayer Leverkusen.
He was also part of Germany's 2010 World Cup team that finished third in South Africa last year.
"I am happy that Bayern is counting on me and hope to win in the coming years all the titles the fans are expecting," Kroos said in a statement.
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