The 29-year-old has scored 10 goals in 44 appearances for Hull, including their first in the Premier League against Fulham 13 months ago.
He joined the club on a free transfer in July 2008 after being released by Manchester City.
Barcelona and Benfica player was one of the stars of Hull's first season in the Premier League.
His new deal extends his previous arrangement by one year, committing him to the club until 2011.
Manager Phil Brown said: "It's fantastic, great news for me and great news for the club.
"He has committed for another two years and, who knows, maybe further.
"Maybe that could be a catalyst. He was a big player for us last year with eight goals and a number of assists.
"I'm not just happy with his form, I'm happy with his work-rate.
"He has certainly shown me that he has learnt the English way, the game we play it. He has fitted in very nicely this year."