Rafael, 21, joined United from Fluminense with twin brother Fabio in 2008, and has since earned international recognition with Brazil.
United manager Sir Alex Ferguson told manutd.com: "Rafael is one of the club's brightest young prospects; he has no fear of playing and has great belief in himself.
"The boy has developed immensely since joining United, his energy and enthusiasm are a joy to watch. Rafael has all the attributes to become one of the best full-backs in the world and I am delighted he has signed a new contract."
Rafael made 18 appearances for United last season in the Community Shield, Premier League, Carling Cup, FA Cup and Europa League.
The full-back said: "I am so happy to sign a new contract. I love playing for Manchester United, there is a great team spirit here and a real desire to win.
"My time here has been unbelievable; winning two league titles, a league cup and a Club World Cup has made me hungry for more trophies. I would like to thank Sir Alex for his belief in me and I would also like to thank the fans for their support."
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