"It was an easy decision for me," he told the club website (www.swanseacity.net). "I am living a dream here at Swansea.
"I'm probably enjoying my football more than ever. It's easy to play with this team and tonight I have the chance to reach the first final of my career," he added ahead of the League Cup semi-final second leg against Chelsea. Swansea lead 2-0 from the first leg.
Michu has been a revelation of the season with 13 league goals, the fourth highest tally.
Swansea manager Michael Laudrup has described the player, who also fills the role of attacking midfielder, as the "bargain of the season" after he joined from Rayo Vallecano for 2.2 million pounds ($3.5 million) in the close season.
However, the 26-year-old's strike rate had also led to suggestions that the Welsh club would be unable to hang on to their prize asset with bigger rivals expressing an interest.
"I've read and listened to all the speculation, but it doesn't interest me and that's why I've signed a new contract," said Michu.
"I'm enjoying myself too much because the team always tries to play football. All I think about is the next game and helping Swansea be successful. This is my life." ($1 = 0.6302 British pounds)