The Ecuador international, who is currently on World Cup duty with his national team, also has an option for an additional year as part of the deal.
The 28-year-old will now continue his United career under incoming United manager Louis van Gaal, who will succeed David Moyes when his role with the Netherlands at the World Cup comes to an end.
My time at Manchester United has been like a dream come true.
To be the first Ecuadorian player to win the English Premier League was a very proud moment for me and for my country.
I am so happy to have signed a new deal and am looking forward to working with Louis van Gaal.
There is great team spirit within the club and we are all determined to get back to winning ways.
But the winger has now committed himself to Old Trafford until June 2017 at least.
Valencia has been in competition with Portugal international Nani for the right-wing berth since joining United under Sir Alex Ferguson in 2009 for an undisclosed fee, as BBC Sport reported at the time.
However, the South American eventually made 20 first-team starts in the Premier League last season, while also adding nine full appearances in the Champions League, according to WhoScored.com.
Former Manchester United winger and now assistant manager Ryan Giggs recognised the qualities Valencia has brought to the club since arriving from Wigan Athletic.
I'm really pleased Antonio has signed a new contract.
His contribution to the team since he joined the club in 2009 has been fantastic.
Antonio is a very powerful player with great speed and versatility.
He is very professional in his approach to training and I am delighted he has committed his future to the club.
Valencia has played 191 times for United and won two Premier League titles and a League Cup during his time with the club.
The winger became involved in some controversy over his shirt number at the start of last season when he switched from the iconic No. 7 jersey to his previous No. 25, as MUTV reported.
Valencia was quoted as saying at the time:
I think it turned out to be a very good number for me when I first arrived at the club as I was just given the No. 25 more or less.
But things went really, really well. I played well wearing that shirt so I think it was a decision I came to in the summer.
Maybe if I can get back to the form I showed before, why not? It is a good idea to start wearing it again.
It had been something I had been thinking about for quite a long time. I'd been considering a change back and maybe it is psychological or maybe it is just all about a good-luck symbol, if you like.
We get a lot of that in Ecuador, maybe superstition, and l hope it continues and still brings me more good luck this season.
While last season might not have brought too much good fortune for United and Moyes, it appears to have helped Valencia on Saturday as he extended his stay at the club.