Schmeichel - who played every minute of the Foxes' remarkable league campaign last term - has been with the club since 2011 and made over 200 appearances.
The 29-year-old Denmark international told LFC TV as the deal to 2021 was announced on Saturday: "I'm just buzzing and I can't wait for the season to get started.
"It was a very easy decision. It was a case of coming back after winning the Premier League and making sure that the hunger was the same within myself and the squad. I've come back absolutely convinced that this is the place for me to be.
"We've taken some massive steps and ever since I arrived it's been fantastic. I've loved being here from minute one."
