The Argentina midfielder has agreed a deal running until 2028, with the option of a further season, the club said in an official statement.
Rodríguez will continue at Mestalla after playing the second half of the 2025-26 season with Valencia.
The club confirmed the agreement on Friday following several weeks of negotiations that have made the midfielder one of the highest earners in the squad.
Rodríguez joined Valencia in the January transfer window and played 17 official matches under head coach Carlos Corberán, scoring four goals.
The new deal follows a negotiation that ran through much of the past few weeks.
Both the club and the player's camp held talks to continue a relationship Corberán had considered a priority since the end of the season.
Discussions centred mainly on the length of the contract and adapting Rodríguez's terms to his role in the squad.
Rodríguez arrived on a free transfer from West Ham United in January on a deal that only ran until 30 June, meaning a new contract had to be negotiated for him to stay.
Since the season ended, Rodríguez had alternative offers to continue his career away from Valencia, in LaLiga and elsewhere.
Talks with Valencia, and Corberán's insistence that the Argentinian should be one of the squad's key figures next season, led to the two-year deal plus the option of a third, with a significant rise in salary.
Javi Guerra is viewed as the key player in Valencia's plans, with the club looking to build its long-term project around him.
Despite interest from other clubs, Guerra remains at Mestalla for now.
Offers received so far have not matched what it would take for Valencia to sell their best player, in line with the club's approach since Peter Lim's arrival, and Guerra is not expected to move unless that changes.
Guerra, who was called up by Spain head coach Luis de la Fuente to train with the national squad before leaving for the World Cup, discussed Valencia's future on DAZN's Trending Mundial programme.
"They've been difficult years in which we've fought more against relegation than for things like Europe or high places in the table. Given the club's history, I think that needs to improve — we have to start changing things that get us there," he said.
"The first few days off do you good because by the end the season feels long, especially these last ones which have been tough right to the wire. But after a few days the itch comes back to get back playing with the team at Mestalla, which means a lot to us. I've got one more week and I'll make the most of it with family and friends, then it's back with the team," he said.
"Mestalla means a lot to us — I'm speaking for myself — and I think the best moments I've had in football have been at Mestalla. For the pitch, which deserves it, and for the squad and the fans, I think it would be nice to have a great year and give Mestalla the send-off it deserves, and start at the new Mestalla in style too," he added.
Valencia's summer business therefore centres on keeping their core intact, with Rodríguez signed long-term and Guerra remaining at the club for the season ahead.