The Spaniard, who has scored 16 goals in 28 games so far for the Premier League side, has put pen-to-paper on an improved deal that is effectively a one-year extension of his previous contract.
"It was an easy decision for me,'' Michu told the club's official website. "I am living a dream here at Swansea.
"I'm probably enjoying my football more than ever. It's easy to play with this team and tonight I have the chance to reach the first final of my career.
"I'm really happy here in the city with the people, the club and the fans. Everyone has been so nice to me since I arrived.
"I think the club are happy with me because they have given me a new contract. I am certainly happy with the club.''
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