The Portugal international will remain at Anfield until the summer of 2027 as he looks to claim more silverware under the stewardship of Klopp.
The German manager signed Jota from Wolverhampton back in 2020, with Liverpool splashing £41 on his signature.
Since arriving at Merseyside, the forward has scored 34 goals in 85 games across all competitions.
The 25-year-old has claimed three trophies with the Reds, including the FA Cup, League Cup and Community Shield. He was also part of the team which came up short in last year's Champions League final against Real Madrid.
Reacting to Jota's new deal, Klopp told Liverpoolfc.com: "What Diogo has brought to this team and this club since he arrived is there for all to see, so it is really good news that he has signed a new contract. Brilliant, brilliant news, I would say.
"His qualities are obvious. He scores goals - not a bad quality - he works unbelievably hard for the team, his pressing and counter-pressing are on an unbelievable level, he can play in all of our attacking roles and he has an incredible attitude. Not a bad package. Not bad at all.
"As a striker who can play on the wing, he gives us so many options and since he came to Liverpool he has improved so much.
"I have said before that Diogo is the player we hoped he would be but also a little bit better, so long may this continue."