The versatile 33-year-old forward joined Madrid back in 2009 from Lyon and he has racked up an impressive 560 matches for them since. He is currently in his 13th season and was voted La Liga player of the year last season.
After a televised signing ceremony where a best of Benzema video was played the striker posed for a photograph with Real president Florentino Perez with the pair holding up a shirt with Benzema's name and the number 2023 on it.
"The story continues for me at the greatest club in the world," Benzema said.
"What an honour to be here today, thank you for trusting me over the years," he said.
The club thanked Benzema for his long and brilliant service to them
"The French striker has won everything possible in a Madrid shirt with a massive 19 titles: four Champions Leagues, four Club World Cups, three European Super Cups, three Liga, two Spanish Cups and three Spanish Super Cups," the club said.
"With his football he has won the hearts of all Madrid supporters."
Benzema was long in the shadow of Ronaldo and Sergio Ramos, but since the Portuguese left for Juventus three years ago the French international has thrived.
With Ramos also out of the picture since his move to Paris Saint-Germain, Benzema is now the club's senior star player.
One of the eye-catching details of Benzema's new contract was the size of the release clause, at one billion euros.