The fly-half has made 152 appearances for the Aviva Premiership outfit since 2008, helping them win three league titles and two European cups.
His form saw him named the European player of the year in May and he was also given the starting jersey for the British & Irish Lions for the drawn series against New Zealand this summer.
Farrell has secured 52 caps for England and continued to improve under boss Eddie Jones, and Sarries director of rugby Mark McCall insists he can continue his development while helping the club push for more honors.
He told the club's official website: "Owen has developed into one of the leading players in world rugby.
"He is one of our own, so for him to commit his long-term future to the club is huge news - we're delighted that he'll be extending his stay.
"It's an opportunity to hopefully grow with this group again for the next few years; to get better and improve on what we've already done."