Nkunku saw his stock rise this last season after hitting 35 goals and registering 19 assists in 50 appearances for Rb Leipzig.
His form attracted the interest of top European clubs, with PSG, Chelsea and Manchester United all linked to his signature.
Explaining his decision to sign a new contract to the club’s official website, Nkunku said: “I’m pleased to continue wearing the RB Leipzig shirt.
“After our great achievement in winning the DFB-Pokal, it remained clear that my story here isn’t over yet – we want more!
“I was really impressed with the club’s efforts to keep me, so a big thanks goes to those responsible for the trust in me and especially to [Leipzig CEO] Oliver Mintzlaff, with whom I was always in close contact.
“RB Leipzig have made a name for themselves on the international stage in recent years and have shown time and again that we can compete for titles. We want to build on that going forward and go one step further.”
The new deal at Leipzig reportedly includes a €65 million (£56m/$68m) release clause that can be triggered during the summer transfer window of 2023.