Niguez played 53 games for Atletico last season, scoring nine goals, four of which were in the Champions League.
"I am very happy because at Atletico we are a family and there is no better place to be," Niguez said in a statement.
"I will work my full potential on the field as always to pay back the trust that the club is giving to me. I'd like to thank all my team mates and the coaching staff for their help day by day so that I can be the player I am today."
(Reporting by Simon Jennings in Bengaluru, editing by Pritha Sarkar)
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