The 31-year-old Holland international met with Real president Ramon Calderon to sign the new deal at the club's Santiago Bernabeu stadium on Wednesday evening.
He said: "I'm very happy. I love the philosophy of this club and I am delighted to continue here for two more years.
"For me it is an honour to form part of the history of Real Madrid, it is a wonderful day.
"I am going to enjoy every day that I remain at this club. The important thing is that I am able to pay the club back with good football and goals."
The former PSV Eindhoven frontman has scored 46 goals in all competitions for Real since his move to Spain, including nine in the Primera Liga already this season.
In his first season at the Bernabeu, he bagged 25 league goals in 37 matches, a feat that helped Real win the Primera Liga title and saw him finish as the leading goalscorer in the division.
Real are in a strong position to repeat their success this season, sitting seven points ahead of arch rivals and nearest challengers Barcelona at the top of the table ahead of this weekend's game against Levante.
Van Nistelrooy added on his club's website, www.realmadrid.com: "The main thing is that the team plays well and that we win titles.
"We have a high-quality squad, we have experience, youth... We are currently in good form, leaders in the league and in the last 16 of the Champions League and Copa del Rey. The objective is clearly to continue like that."
The Dutchman netted a hat-trick against Levante in a 4-1 win away from home last season, and he said: "I hope the same thing happens!
"It is clear that each game is different. We will have to see what happens. My objective is always the same, which is to score and to help the team to victory.
"But we want to win by playing well, which is what we are looking to do all this season. Currently we are doing well and we want to continue like that that."
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