The 21-year-old Brazilian has been with the Red Devils since 2008, when he left Fluminense with twin brother Fabio to sign for United.
Rafael made 18 appearances last season in the Community Shield, Barclays Premier League, Carling Cup, FA Cup and Europa League.
United manager Sir Alex Ferguson has frequently spoken about his high hopes for the brothers and is delighted to have agreed terms with Rafael.
The Scot told ManUtd.com: "Rafael is one of the club's brightest young prospects; he has no fear of playing and has great belief in himself.
"The boy has developed immensely since joining United, his energy and enthusiasm are a joy to watch. Rafael has all the attributes to become one of the best full-backs in the world and I am delighted he has signed a new contract."
The right-back is equally pleased to have secured his future.
"I am so happy to sign a new contract," Rafael added. "I love playing for Manchester United, there is a great team spirit here and a real desire to win.
"My time here has been unbelievable; winning two league titles, a league cup and a Club World Cup has made me hungry for more trophies. I would like to thank Sir Alex for his belief in me and I would also like to thank the fans for their support."