The 25 year old is now contracted with the Champions until the 2014/15 season after impressing since joining he club from Wigan Athletic two years ago and making nearly 70 appearances.
Valencia struggled last season through injury and was sidelined for five months, but he made a successful return when called upon by Sir Alex Ferguson.
He was a stand-out performer as United overturned Schalke in the Champions League semi-final and was part of the side defeated by Barcelona in the final.
But now there is even ore competition for places after the arrival of Ashley Young from Aston Villa, but both the player and manager were glad to see a new contract signed.
"Antonio has made a fantastic contribution since his arrival. His speed, crossing ability and versatility have been a big asset for us," Ferguson told www.manutd.com.
"He has a quiet, unassuming way of going about his business, which is underlined by great strength of character - as his recovery from such a bad injury last season proves."
Valencia added: "I am delighted to stay at United. Since my first day at Carrington, I have been happy here. I hope that I can continue to develop as a player.
"I am looking forward to making my contribution to helping this squad compete for more trophies."