Elliott started three of Liverpool's first four Premier League matches of last season before sustaining a fracture-dislocation of his ankle at Leeds which sidelined him for five months.
However, he has bounced back to full fitness and come off the bench in both of Liverpool's two games so far this season against Manchester City in the Community Shield and his old club Fulham on the opening weekend of the Premier League season.
The midfielder's new deal will reportedly run until 2027.
"It’s always nice to know that I’m going to be here for many more years, which is always a great thing with it being my boyhood club," Elliott told the Liverpool website.
"There is nothing in this world that makes me more happy and more excited than this."
In total, Elliott has made 22 senior appearances since arriving at Anfield in the summer of 2019.
"There is so much to like about this," said Liverpool manager Jurgen Klopp.
"For us, as a club, we get to continue our journey with a special young player who has already made a big impact on Liverpool FC.
"For Harvey, he gets to carry on developing, improving and hopefully fulfilling his incredible talent at the club he has always supported. What’s not to like?"
