The England international, who moved from Portsmouth two years ago, is believed to have extended his deal, which had two years left to run, by a further two years to keep him at the club until June 2015.
Johnson endured a difficult start to last season and, after becoming injured, lost his place at right-back to youngster Martin Kelly midway through the campaign only to come back and excel on the left of defence under Kenny Dalglish after he took over from Roy Hodgson in January.
Director of football Damien Comolli said: "We are absolutely delighted. We were in talks for a few weeks but it was easy to find an agreement because he wanted to stay and we wanted him to stay.
"We are very pleased he wants to commit long term and I think he was pleased we went to him and asked him to commit long term.
"We are happy his long-term future is at Liverpool."
The 26-year-old has made 70 appearances for the Reds but Comolli believes the defender has not yet reached his prime.
"His best years are to come. Very often defenders peak between 26 and 31, so he is just entering into those years where a maturity comes in and his knowledge of the game gets better and better," he told liverpoolfc.tv.
"It's obvious when you watch him play his technical ability is second to none.
"Physically he is absolutely fantastic as well and his fitness level is great.
"Towards the end of last season he showed how versatile he is by playing at left-back or right-back - mostly at left-back - and was outstanding.
"For us he is a great asset to have around. As we've always said, we don't want to sell our best players or sell our assets and as long as the players are happy to be here, we're happy to commit to them."