"I think this news can be seen for what it is; rewarding a person who performed and contributed greatly for the team and the club last season," manager Juergen Klopp told the club's website.
"It demonstrates two things very clearly also - his belief in Liverpool and our belief in him."
"Mo reflects where we are as a team, I think. Last season was special with many special moments - but we want more."
The 26-year-old netted 32 times in the Premier League, breaking the record for the most goals scored in a 38-game season, and helped the Merseyside club to a fourth-place finish.
(Reporting By Arnab Paul in Bengaluru; Editing by Peter Rutherford)
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