The 23-year-old forward put pen to paper on a new three-year deal at PSG, rumoured to be worth around £4million per month.
Mbappe has been at the heart of transfer speculations for over a year, with Real Madrid moving heaven and earth in their pursuit of the forward.
The World Cup winner was set to be out of contract this summer, and was understood to have agreed a financial package with the current La Liga champions.
Instead, Mbappe appears to have used Real's interest as a bargaining chip for a better PSG deal - a strategy which has clearly reaped economic rewards for the French international.
Not long after PSG confirmed the contract extension, La Liga released an official statement lambasting the move and threatening legal action.
The statement reads: "LaLiga wishes to state that this type of agreement attacks the economic stability of European football, putting at risk hundreds of thousands of jobs and the integrity of the sport, not only in European competitions, but also in domestic leagues.
"It is scandalous that a club like PSG, which last season reported losses of more than 220 million euros after accumulating losses of more than 700 million euros in prior seasons (while reporting sponsorship income at doubtful valuation), with a squad cost around 650 million for this season, can close such an agreement, while those clubs that could afford the hiring of the player without seeing their wage bill compromised, are left without being able to sign him.
"LaLiga will file a complaint against PSG before UEFA, the French administrative and fiscal authorities and European Union authorities to continue to defend the economic ecosystem of European football and its sustainability."
The statement goes on to accuse PSG of economic breaches, saying: "PSG is assuming an impossible investment, seeing that it has an unacceptable wage bill and large financial losses in prior seasons. It is violating current UEFA and French economic control rules.
"This behaviour demonstrates once more that state owned clubs do not respect and do not want to respect the rules of a sector as important as football. These rules are key to protect and sustain hundreds of thousands of jobs.
"This kind of behaviour led by Al-Khelaifi, president of PSG, and member of the UEFA Executive Committee and president of ECA, endangers European football on the same level as the European Super League."