The German international, who made his name in the youth ranks of Southampton and Chelsea before moving to Bayern as a 16-year-old in 2019, has been a stalwart in Vincent Kompany's team this season, making 18 league appearances and scoring 10 goals from midfield.
Speaking about his extension with Bayern, Musiala said in a statement: "I am very happy. Bayern is one of the most important clubs in the world, this is where I took my first steps in professional football, and I am convinced that I can achieve great things with this club in the coming years.
"I feel at home both in Munich and at the club with our great fans. We’ve got a lot of things we want to achieve. I’m excited for everything that’s to come.”
The Stuttgart-born forward has already made 132 appearances for Bayern in the league as well as 43 in the Champions League, making him one of their most influential talents as his star has risen.
Bayern's sporting director, Christian Freund added: "Musiala always creates genius solutions with his outstanding ability on the pitch. That’s his gift. Despite his young age, he already holds a lot of responsibility. You can sense that he quickly absorbed the Bayern philosophy at the FC Bayern Campus. We’re delighted to be taking on our lofty goals with him in the coming years.”
Musiala, who made appearances for England at youth level, made his Germany debut in 2021, scoring his first goal for the national team a year later. He was a prominent member of their EURO 2024 squad too, scoring three goals in five games.
The news comes hot off the heels of Alphonso Davies' contract extension, which was announced in January.
Bayern travel to title rivals Bayer Leverkusen on Saturday, looking to open up an 11-point gap at the top of the table.