Araujo's previous deal was due to expire next year and his commitment comes as a huge boost to Barca, who see the 23-year-old as a key player for the future.
Barcelona's financial problems mean the club cannot currently compete with Europe's richest clubs and Araujo had reportedly been attracting interest from teams in the Premier League.
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After joining Barca's B team from Uruguayan side Boston Rover in 2018, Araujo made an eventful first-team debut against Sevilla a year later, when he was sent off 14 minutes after coming on as a substitute.
But the youngster quickly found his feet and has emerged as a first-choice starter in Xavi Hernandez's defence this term.
He has made 26 appearances this season in LaLiga, scoring four goals, including one in the 4-0 thrashing of Real Madrid in March.
Cheers#MadeInLaMasia pic.twitter.com/2Druyu6txm— FC Barcelona (@FCBarcelona) April 26, 2022
"He has proved himself to be the present and future for Barca, becoming an integral part of the Blaugrana defence," the club said in a statement.
"His talents in defence and scoring goals mean he is a key player for years to come as his tally of four goals this season proves."