The 18-year-old put pen to paper on the new contract after initially rejecting an extension to his current deal, which was due to expire at the end of the coming season.
The Italy international made his Under-21 debut in 2015 and was called up to the senior side in 2016, earning four caps.
Donnarumma played in the European Under-21 Championship last month in Poland, where he had fake money thrown at him during the match against Denmark due to his contract standoff with Milan.
(Reporting by Pete Hall; Editing by Christian Radnedge)
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