Alexander-Arnold, graduating through the club's youth academy has made 179 appearances since his first-team debut in October 2016.
Arnold has won Premier League, Champions League, FIFA Club World Cup and UEFA Super Cup winners’ titles with the Reds.
"I'm honoured to be given the opportunity and to be shown the trust in the club to be given an extension, so it was a no-brainer for me.
"The state the club is in and where I'm at in my career is always a good option for me. To extend and make sure I'm here longer is always a good thing. I'm made up.
"It's the only club I've ever really known, so to be here for this amount of time and extending to be here for a longer amount of time is amazing for me and my family.
“It's a proud moment for me – it always is – signing a new contract here. To be given the trust, like I said before, by the club and the staff is an amazing feeling.
"It’s not too often [I think about it] but I think I've achieved so much, I've achieved so many dreams and goals that I never actually thought I would,” he continued.
"I live the dream every day really. Being able to represent the club and to be in and around names and players, and obviously managers and staff, that are world class every day is a privilege for me and I'm very fortunate to be in the position I am."
Arnold failed to make England's 23 man-squad that were beaten by eventual winners Italy in the Euro 2020 final after suffering a thigh injury in a warm-up match before the tournament.
