The 31-year-old France international has been in impressive form this season, scoring 13 goals in all competitions to date.He had attracted interest from a number of clubs across Europe.
"It didn't take me long to know I wanted to stay because I have enjoyed my time here and I want to be part of the future of Everton," said Saha.
"At certain stages in your career you look at where you are going and by staying at Everton I feel I am going up in my career."
Saha has been enjoying something of a renaissance since arriving at Goodison Park from Manchester United in 2008.
His haul of 21 goals for the Merseysiders includes the fastest FA Cup Final strike, against Chelsea last May.
Reports had linked the Frenchman with Bordeaux in France, Turkish outfit Besiktas and AS Roma in Italy but manager David Moyes never had any doubts.
Speaking ahead of the 213th Merseyside derby at Anfield, the Blues boss stated: "We have always felt quite confident that Louis would sign a new contract."
Everton had been desperate to hold on to their top scorer this season, who has also played for Newcastle and Fulham.
Talks between the player's representatives and club officials had been ongoing for a couple of months.
It is a pleasure to be here and see the way the fans work for the team
Louis Saha
Everton
And Saha has revealed that the Goodison faithful played a big part in his decision to remain at the club.
"I appreciate the way the Everton fans support the team and the way they support me all the time," he added.
"It is a pleasure to be here and see the way the fans work for the team, they help all the players. It feels like a family and I really feel a part of it."
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