The left-back's previous deal was set to expire in 2017, but a significant improvement in form over the past two seasons has earned Monreal a north London extension.
Monreal has become a staple of Arsene Wenger's back line since arriving at Arsenal from Malaga in 2013, overcoming competition from Kieran Gibbs to take his spot as first-choice left-back.
His domestic form has also aided the Gunners in making strides up the Premier League table this season, and in November, Monreal discussed the team dynamic with the Sun's Dave Fraser:
I think the level of the team is better now and I hope we can do something special this season.
At the moment, everything is right so we need to carry on.
The secret? I will say that we are playing more compact, like a unit.
The players are playing with more solidarity, all players try to defend. I think this is the [reason for] that.
The Spain international has made over 80 league appearances for Arsenal since completing an £8.3 million move to England's capital, winning back-to-back FA Cups over the past two seasons.
Monreal has also rejected the chance of a return to La Liga by agreeing fresh terms at Arsenal, with Metro's Sean Kearns reporting earlier this season that Athletic Bilbao were set to move for the 29-year-old.
After a settling-in period at the Emirates, Monreal has adapted to life in the Premier League and is now considered one of the club's more consistent stars.
Wenger will hope the announcement of the new deal only marks the beginning of those improvements, as Monreal and the Gunners now look to add to their collection of English titles.