The 28-year-old Sweden international, whose existing deal was due to expire at the end of this month, has committed his future to the Black Cats until the summer of 2017.
Upon signing the contract he said: "I'm delighted to have signed a new deal with the club
I've had talks with (manager) Gus (Poyet) and (sporting director) Lee Congerton and I feel that this is a club moving in the right direction and I want to be part of it."
Larsson was one of three out-of-contract players Poyet hoped to retain after the club's remarkable surge to Barclays Premier League safety last season, but the first to give him the answer he was looking for.
Full-back Phil Bardsley decided instead to join Stoke, while midfielder Jack Colback, who is interesting a series of suitors including West Ham and Newcastle, has yet to make a decision.
Larsson revealed he too had options, but decided to stay where he was having made 41 appearances last season.
He said: "I had a few options, but I want to be at Sunderland and I'm looking forward to the new season."
The Swede's decision will come as a boost to Poyet as he attempts to avoid a relegation fight next season.
He and Congerton have wasted little time in making their moves with West Brom full-back Billy Jones and Wigan midfielder Jordi Gomez having already been drafted in as free signings to replace the departed Bardsley and Craig Gardner.
Source : PA
Source: PA