Villa announced the deal on their official website, with Grealish now committed to his boyhood club until 2025.
The 25-year-old midfielder, who made his England debut against Denmark this month, first caught the eye in the 2014-15 and 2015-16 Premier League seasons, when still a youngster.
He stayed with the team after their relegation to the Championship, despite interest from top-flight teams, and finally helped Villa out of the second tier after three years of trying.
Last season he scored eight goals and had six assists in the Premier League, playing a crucial role as Villa avoided relegation in a dramatic finale to the campaign.
Grealish said of his new deal: “I am delighted to make this commitment to Villa. It is my club, my home and I am very happy here.
“The owners have made it very clear to me how ambitious they are and how they want to build Aston Villa. There are exciting times ahead and I am very glad to be part of it.”
Get breaking news alerts.
You have already subscribed