Jota has won 27 caps for Portugal
The Portugal international, 25, has scored 34 goals in 85 games since joining from Wolves in 2020 for £41m.
He scored 21 goals last season as Liverpool won the FA Cup and EFL Cup and finished as runners-up in the Premier League and Champions League.
"It's obviously from the club's perspective proof of the belief in myself as a player," Jota said.
"Since I arrived two years ago I established myself as an important player in this team - that's what I wanted from the beginning."
Jota, whose current deal was due to expire in 2025, has missed pre-season with a hamstring injury and said he would be out for "a few more weeks".
"When you fight for everything, like we did last year, you just want to do it again and to do it better, because it's possible," he said.
"That drive is in me and I know it's in my team-mates and all the staff. We have everything to fight for those titles out there."
Manager Jurgen Klopp said: "As a striker who can play on the wing, he gives us so many options and since he came to Liverpool he has improved so much.
"I have said before that Diogo is the player we hoped he would be but also a little bit better, so long may this continue."
Last month, Mohamed Salah signed a new three-year contract following the departure of fellow forward Sadio Mane to Bayern Munich.
-- Courtesy of BBC Sport