The Uruguay international has had a hot and cold time in England since moving to Merseyside from Ajax in January 2011, and has been linked with a move to both Paris Saint-Germain and Juventus in recent times.
Despite this, the South American has put pen-to-paper on a new contract and claims he is happy at Brendan Rodgers’ side.
“To sign a new contract with Liverpool is unbelievable for me because I am so happy here at both the club and also in the city,” he told the Reds’ official website.
“That is important for me and I am very happy with my new contract.
“When you are a kid, everybody wants to play for Liverpool. I am here now and it is a dream for me, and now I am a Liverpool fan.
“I am happy off the pitch because the people of Liverpool are good with me and my family. I try my best on the pitch and when you are happy off the pitch, you are happy on the pitch.
“I want to say thank-you to the fans because they are our 12th player. The supporters of Liverpool are unbelievable.
“Five or six years ago I watched on TV the stadium and the club, and now I play here and the supporters have helped me. That’s very important for me,” he concluded.
By Gareth McKnight