The 29-year-old, who has won the Europa League, two Premier League titles, the FA Cup and the League Cup with Chelsea, has captained the team in the league this season.
"I'm happy to extend my stay here at Chelsea. Since I came, I felt the joy and responsibility to play for this club, these fans, and every time I go on the pitch I try do my best," the Spain international told the club's website.
"Hopefully there is a lot to come and we can keep Chelsea where it belongs."
Chelsea, who are third in the league with 31 points from 14 games, travel to promoted Wolverhampton Wanderers on Wednesday.
(Reporting by Shrivathsa Sridhar in Bengaluru; Editing by Ian Chadband)
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