The 22-year-old joined the Blues for an undisclosed fee in July 2011 and spent the next three seasons on loan at Atletico Madrid where he established himself as one of the best keepers in the world with a string of impressive performances.
Courtois returned to Stamford Bridge this season and started the first three matches of the Barclays Premier League season ahead of Petr Cech before being rewarded with a new deal.
"Chelsea Football Club is pleased to announce Thibaut Courtois has today signed a new five-year contract," said a statement on the club's website.
Courtois added: "I'm very happy with this new deal; it's really nice to have signed this new contract for five years.
"My future was already sorted but it's nice to know I'm going to be here for another five years and now I can just concentrate on playing games."
The news brings into doubt Cech's future at Stamford Bridge, with manager Jose Mourinho preferring Courtois at the start of the campaign.
The 32-year-old Czech Republic goalkeeper has faced unfamiliar circumstances this season, beginning the season on the substitutes' bench.
It is a situation reminiscent of when Cech was installed as number one ahead of the established Carlo Cudicini after his signing from Rennes in June 2004. That, too, was a decision made by Mourinho.
Courtois, who had two years remaining on his existing deal, made his Chelsea debut in the opening 3-1 win at Burnley last month, but he has proved his credentials on the big stage.
He won Spain's Primera Division title with Atletico last season and the Europa League in 2012.
Three times he played against Chelsea for Atletico - in the European Super Cup in 2012 and in last season's two-legged Champions League semi-final, when he played at Stamford Bridge as a Blues player for the first time.
Atletico prevailed, but lost to city rivals Real Madrid in the final.
Courtois was also Belgium's first-choice goalkeeper at the 2014 World Cup finals in Brazil, when they reached the quarter-finals.