The 28-year-old's deal at the Allianz Arena had been due to expire at the end of this season.
However, the Brazilian, who joined Bayern from Italian side Genoa in June 2011 has opted to continue his stay with the Bavarians for a further three years.
"I am very proud," Rafinha told FCB.tv.
"It's very important for me, my career and my family that I can continue to play for one of the best clubs in the world."
Rafinha has made over 70 appearances for in his two years at Bayern, and won the first major honours of his career in their treble winning campaign last season.
The right-back is in line to add another medal to his collection after he helped Bayern secure their place in the FIFA Club World Cup final with a 3-0 win over Chinese outfit Guangzhou Evergrande.
"It's a dream to play in this final," he added.
"We really need to play well and win."
Pep Guardiola's men will be heavy favourites to beat Raja Casablanca and lift the trophy on Saturday as the former Barcelona coach looks to win his second piece of silverware with Bayern following victory in the UEFA Super Cup back in August.
