The Belgian international enjoyed a fine first season in England, as his 19 league goals helped Villa beat the drop.
Tottenham had looked in pole position to sign the forward after he submitted a transfer request, with the Guardian reporting a fee of £25million was mooted, but this latest development ends any hope of the Londoners securing the frontman.
Villa boss Paul Lambert told the club website: “I had a full and frank discussion with Christian Benteke on his return to training this week regarding his future.
“It is my opinion that the best thing for Christian is to remain at Aston Villa.”
Aston Villa spent the majority of last season in the relegation zone, but Benteke adapted to the physical nature of the Premier League and bullied defences into presenting him with scoring opportunities.
Benteke said: “I spoke with the manager when I returned to training and we had a good talk.
“I am very happy to be back here in Birmingham and at Aston Villa, and to sign a new contract.”
The striker’s decision leaves Spurs in serious trouble ahead of the new season with only Jermain Defoe and Emmanuel Adebayor as recognised strikers. Their fans are likely to vent their frustration at chairman Daniel Levy, who is renowned for driving a hard bargain in the transfer window.
Benteke must now settle back into the swing of things at Villa Park quickly to help the club avoid the shambles of last season—the lowest point coming when they were knocked out the League Cup by Bradford City of the fourth tier.
His decision is undeniably a risky one with the World Cup in Brazil under a year away and Belgium building a side capable of challenging for glory.
He must now hope that his rival for the starting berth in the national side, Romelu Lukaku—who enjoyed an equally impressive 2012-13 season—struggles to get game time under Jose Mourinho at Chelsea.