"It's great news, I'm really enjoying my time here and I wanted to show my commitment to Manchester United, but also repay the faith that Sir Alex (Ferguson) has shown in me," Saha told Manchester United's website.
The 28-year-old has suffered a series of injuries since joining United from Fulham in January 2004 for 12.8 million pounds ($25.23 million).
However, the prolific striker, whose initial contract runs out in June 2009, regained his form and played a big role in the Red Devils' run to the summit of the Premiership table and qualification to the UEFA Champions League knockout stage.
"Hopefully, we will have an exciting end to the season and add some silverware to the trophy room," added the former Metz player.
United's coach Ferguson expressed his delight that Saha will continue at Old Trafford.
"We are happy to see Louis here until at least 2010 and to add him to the other players who have recently signed new contracts like Cristiano Ronaldo and Wayne Rooney... It bodes well for the future," the Scotsman said.