The Hurricanes and Wellington star posted the news to social media this morning and his decision comes after French media reports he was set to join the Pau club after next year's World Cup.
"Truely (sic) blessed to have re-signed with NZ for 2020-2021," Savea posted on Instagram.
"To be honest was a very tough decision but being at home with family and close friends and the opportunity to play for @allblacks @hurricanesrugby @wgtn_rugby I couldn't leave.
"Thank you to the fans for the on going support. Can't wait to get stuck in to 2019 with my canes brothers".
The 25-year-old has played 35 tests for the All Blacks since making his debut against Wales in 2016, 24 of those appearances coming off the bench.
Savea played a prominent role and impressed on the team's recent European tour, starting in the No 7 jersey in place of the injured Sam Cane.
Cane broke a bone in his neck during the 32-30 victory over the Springboks in Pretoria in early October.
Savea made his debut for the All Blacks in 2016 and has spent much of his international career as a backup to Cane.
He was arguably New Zealand's best player in tests against Argentina and South Africa during the Rugby Championship, earning plaudits from the national team's coaches.
While he is expected to make a full recovery, the seriousness of the injury undoubtedly changed All Blacks coach Steve Hansen's thinking on the composition of his squad for next year's World Cup defence.
The new contract with NZR ends a potential Savea family reunion in France's Top 14.
Savea's older brother Julian was granted early release from his NZR contract this year after being dropped by the All Blacks and joined Toulon.