The 19-year-old, who played at the World Cup, put pen to paper on an extension last summer that was agreed when he negotiated his initial contract with the north London club.
However, he was expected to sign a new longer-term deal after emerging as one of Europe's most promising players since joining the Premier League club from Barcelona three years ago.
Fabregas became Arsenal's youngest player and scorer in his first season and is setting his sights on major honours after committing his future to the north London club.
"I am so happy here and I am delighted to have signed this new contract that will keep me at the club for years to come," he was quoted as saying on Arsenal's official Web site.
"I wanted to pay back the club, especially (manager) Arsene Wenger for the support and faith he has shown in me.
"What is important now is for the team to realise its potential and win trophies. That is our main aim, that is my aim as well."
Fabregas joined from Barca's youth ranks in July 2003. Real Madrid expressed interest in taking the midfielder back to Spain in the close season but he made it clear he was happy in London.