The 26-year-old Serbia international moved to Stamford Bridge in January 2008 for an undisclosed fee.
He has made 99 appearances for the Blues and was named in last season's PFA Premier League team of the year.
"It is good news for me, it is a very big step for me in my career and I want to try to help Chelsea win a lot more trophies," he said.
"These things take a little time but my first vision was always to stay with Chelsea.
"There were not a lot of problems because I wanted to stay, the club wanted me to stay and I want to thank everyone who helped with the deal. I am very happy with that."
During his three years at the club Ivanovic has won two FA Cups as well as last year's Premier League title, and has scored seven goals.
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