Real Madrid announced a contract extension for Nacho shortly after fellow centre-back Sergio Ramos' move to Paris Saint-Germain was confirmed.
Madrid great Ramos left the Spanish club when his deal expired at the end of last month and joined PSG on Thursday after settling on a two-year agreement.
Ramos had wanted a two-year commitment at the Santiago Bernabeu, although he claimed in June he had belatedly accepted a 12-month contract offer before it was withdrawn.
Nacho, who was still under contract until 2022, has secured a deal that now runs alongside Ramos' PSG agreement to 2023.
The timing of Madrid's announcement was curious, although Nacho confirmed in April his future would be linked to a decision on Ramos.
"Of course, whether Madrid renew Ramos or sign a central defender or two are decisions that influence my future," he said.
As well as Ramos leaving on a free, Raphael Varane has been linked with Manchester United, leaving Madrid light in that position.
Nacho will hope that means increased opportunities, although he started 30 games in all competitions last season, profiting from Ramos' injury woes. The captain started just 21.
Madrid conceded 21 goals with Nacho on the pitch, the same number as with Ramos involved despite the new PSG signing playing only 1,790 minutes to his team-mate's 2,765.
No Blancos defender made more tackles (45) or interceptions (52) than Nacho – 18 and 27 for Ramos – but he won a less impressive 50.8 per cent of his duels and 50.0 per cent of his aerial tussles.