The France international's deal was due to expire at the end of the current campaign, but he will now stay at the Parc des Princes until 2018.
Matuidi has been a regular for Laurent Blanc's men this season, making 25 Ligue 1 appearances and contributing three goals.
He had been linked with Manchester United, Arsenal and Manchester City, but has opted to remain with the cash-rich capital club.
"Paris Saint-Germain are pleased to announce the extension of four years of the contract of Blaise Matuidi," the club wrote on their official Twitter account.
The 26-year-old made the switch to the Parisian giants in July 2011 in a reported €7.5 million switch from fellow Ligue 1 outfit Saint-Etienne.
Previously Matuidi spent three years at Troyes between 2004 and 2007, before moving to Saint Etienne.
Matuidi was part of the side that collected the Ligue 1 title under Carlo Ancelotti last season, and is well positioned for add another league winners medal to his collection with Blanc's charges five points clear at the top of the table from second-placed Monaco.
They also look set to reach the UEFA Champions League quarter-finals, having thrashed Bayer Leverkusen 4-0 in the last 16 first leg last week.
