The Turkey international has established himself as a key component in Atletico's first team since joining from Galatasaray in August 2011, helping the club win the UEFA Europa League, UEFA Super Cup and Copa del Rey.
And the 26-year-old is delighted to have put pen to paper on a new contract with the La Liga outfit, who have started the new season superbly by winning all four of their league games and their UEFA Champions League opener against Zenit St Petersburg.
"I feel very happy to have extended my contract with Atletico, after two years with Atletico I feel like part of the family which is this club," he told the club's official website.
"If I'm so happy at the club, it's because my team mates are so strong and we're all in this together.
"I want to thank not only my colleagues but the coaches and all those who work at the club because they all form this big family."
Atletico sporting director Jose Luis Perez Caminero was also thrilled to tie down the playmaker.
"The extension of Arda joins the other important parts of our squad and it is a source of great satisfaction," he explained.
"Arda gives us imagination, creativity ... he is a different player."
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