The new contract would make the Brazilian the highest paid footballer in the club. Coutinho is set to earn £150,000 a week.
Liverpool confirmed the news on Twitter. Their official tweet read:
After committing his future to the Reds, the Brazilian midfielder speaking to the club's official website said: "It is a club that I am very grateful to and this shows my happiness here. I signed this new contract to stay here for a few more years because it's a great honour for me.
"It gives me great happiness because I was welcomed here with open arms by everyone at the club and the supporters right from my first day."
Coutinho had joined the club in 2013 from Inter Milan when Brendan Rodgers was in charge. The midfielder has grown brilliantly in stature in the last few seasons and now under Jurgen Klopp, he is one of the best midfielders in the world.
In the ongoing English Premier League season, he has scored 6 goals in 14 matches for the club.