Garnacho has made 31 appearances and scored four goals since breaking into the Manchester United first team last season.
The 18-year-old Argentine is highly regarded at the club, having joined the academy from Atletico Madrid in 2020.
Garnacho won his first trophy with Manchester United back in February in the shape of the League Cup and is keen to help the Red Devils return to their glory days under manager Erik Ten Hag.
"When I joined this incredible club, I dreamt of achieving my debut, playing at Old Trafford, scoring my first goal and winning trophies with this badge on my chest," he said.
"I feel very proud and emotional to have experienced these moments already, together with my family who have supported me every step of the way.
"We are all humbled to have this chance to continue our journey at Manchester United and I have already begun to work on achieving the next set of targets and ambitions.
"The manager and his coaching staff have helped me to improve in every way, and with their support, I am developing each day to help the team to be successful.
"I am relishing the future and can't wait to create more special memories with this group, in front of our amazing supporters."
United director of football John Murtough added: "Alejandro has really dedicated himself to achieving the objectives that the club set out for him since he arrived in Manchester.
"His talent, drive and determination to succeed saw him quickly progress from our academy into the first team, and this new long-term contract reflects our confidence in him to continue his exciting development under the guidance of Erik and his staff.
"Alejandro has huge potential, and we are all looking forward to working with him to ensure he can fulfil his ambitions here at Manchester United in the coming years."
