Albion boss Roy Hodgson confirmed on Thursday afternoon that the club had rejected a £4million bid for the 30-year-old from Wigan last weekend.
Tottenham were also reportedly monitoring the situation, but the player today penned a new three-year deal - much to the delight of Hodgson.
He said: "I'm obviously very pleased that Peter has pledged his future to West Bromwich Albion.
"I always believed this would be the case and I am grateful to both him and the club for reaching an agreement.
"We can now look forward to benefiting once again from Peter's goalscoring prowess and seeing him play an important part in our campaign to stay in the Premier League for a second successive season."
Hodgson earlier spoke about the Latics' attempts to lure the player and said the bid had been "very easy" to reject.
He said: "I do not think we have concerned ourselves with any bids
that have come in for him so far.
"A bid did come in from Wigan but it was way, way below our valuation of the player. I know it was a very easy one for us to turn down."
Odemwingie enjoyed a sparkling debut season in England last term, finishing as the Barclays Premier League's fifth highest scorer with 15 goals.
The former Lille forward, who cost Albion £2.5m from Lokomotiv Moscow last summer, had 12 months left on his previous deal while the club also held an additional one-year option on him.
Sporting and technical director Dan Ashworth said: "It has been well documented that Peter still had two years left on his previous deal but, off the back of his achievements last season, the club wanted to reward him with an improved, longer-term contract.
"We have obviously been involved in lengthy discussions with Peter over the summer and I am delighted that they have come to a successful conclusion.
"From the outset, both parties wanted this to happen but, as with any contract, there are always one or two issues to be ironed out.
"Peter can now fully focus on showing everyone what a key player he is for West Bromwich Albion and contributing to what we hope will be another successful season."
News of Odemwingie's new deal will give Albion a boost ahead of their match at Chelsea on Saturday evening.
The Stamford Bridge encounter will see the Baggies come up against Chelsea's £50m striker Fernando Torres, who Hodgson worked with during his ill-fated six-month stint in charge of Liverpool last season.
The Spain marksman has struggled over the last year or so, but Hodgson has no doubt he will come good.
"I am very glad for him that he appears to be showing some of his old form," he said.
"Torres in the form he is capable of showing is capable of causing a lot of problems for my defence.
"But I am particularly pleased for him. I enjoyed my time working with him. It was not a good time for him. But these things happen at football
"I do not know what he would say but so far as I am concerned I have a lot of time for him and a lot of respect for him.
"If he is now getting back to his top form for Chelsea, as I knew he would, then I am very pleased for him.
"He is a good fellow. He is a serious professional. I was unlucky that I caught him and a few other players on the back of a World Cup and in his case an unsuccessful World Cup.
"Under me he had serious injury problems. His wife was having a baby at the time as well, which was an important point in his life.
"If you take that very short period we worked together, there were things going on in his life which had little to do with football and which I could not control.
"I never doubted him as a person or as a player. It was bold of Chelsea to pay a big transfer fee for him when the consensus was that he wasn't at his best.
"But I always believed that it was a move which would pay dividends because he is a top-quality player and I fear that I will see that at
close hand on Saturday."
He quipped: "I only hope that he takes pity on me and has a bad game out of sympathy with our plight!"