The Mali midfielder, 22, had been linked with a summer move away from Anfield but has joined captain Steven Gerrard, Jamie Carragher, Xabi Alonso and Jose Reina in penning a long-term deal.
After signing the paperwork that will tie him to the club until 2011, Sissoko told the club's official website: "It was never in my thoughts to leave Liverpool.
"I read about the speculation linking me with other clubs but I am already at a big big club and it's an honour for me to be able to call myself a Liverpool player."
Sissoko, who joined Liverpool from Valencia in the summer of 2005, has been arguably the club's most improved player under manager Rafael Benitez.
He has suffered more than one serious injury while at Anfield, and lost his place as midfield anchorman following the arrival of Javier Mascherano during the second half of last season.
But Sissoko has vowed to battle for his place, saying: "I feel fresh and can't wait for the new season to start.
"I am injury-free and although I know I'll face a battle for a place in the team as we have so many great midfielders I'm prepared to fight for a position.
"It obviously gave me a huge boost to my confidence that the manager believes in me and wanted me to stay at the club. Now I want to repay him on the pitch."
Sissoko's commitment comes on the same day Liverpool captured their second top European teenager inside 48 hours as Benitez's summer spending gathers pace.
Just a day after Levski Sofia announced Bulgarian international goalkeeper Nikolay Mihaylov would be joining the Reds on a three-year deal, Athletic Bilbao confirmed that young defender Mikel San Jose was also bound for Anfield.