His new contract runs until the summer of 2025 with an option to extend by one year.
The midfielder has spent his entire career with the Spanish giants.
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Koke has made five assists in 39 competitive games for Atletico Madrid this season.
The 32-year-old has 47 goals and 116 assists in a total of 625 games at senior level.
Koke has also made 70 international appearances for Spain.