The 28-year-old Holland international's current deal was due to expire at the end of next season and manager Rafael Benitez is delighted Kuyt has joined captain Steven Gerrard in committing his long-term future to Liverpool.
He told www.liverpoolfc.tv: "This is another great piece of news for the club.
"Dirk had one year left on his contract and we were keen for him to stay. He is a player with great quality who has a big part to play in our future. We are delighted to have reached an agreement.
"To have announced new deals for Steven and Dirk on the same day shows how hard everyone is working and that we are moving forward quickly as a club. These are very positive messages and I am very happy."
Liverpool previously announced that Gerrard had signed a deal which will keep him at Anfield until 2013.
Kuyt joined Liverpool from Feyenoord in the summer of 2006 and has been transformed from a striker into a right-winger.
He has scored 10 goals in 41 appearances for the Reds this season and has emerged as a key figure in Benitez's title-chasing team.
Liverpool are currently one point behind Barclays Premier League leaders Manchester United having played a game more than their bitter rivals.