The 18-year-old committed his future to the club by penning the deal at the AXA Training Centre on Thursday afternoon.
He told Liverpoolfc.com: “Obviously I’m so, so happy, so excited to keep playing for this club and hopefully I can play more years together. Me and my family are very proud to sign a new contract with this club.
“It feels amazing. It's something I've been dreaming of in these two years I've been here and something that I've been working hard [for] as well.”
Bajcetic arrived at the Reds from Celta Vigo in December 2020 as he went on to represent the U18 and U21 sides in the Academy set-up.
Having been part of the first team's pre-season ahead of the 2022-23 campaign, the Spain youth international was then handed competitive opportunities by Jürgen Klopp.
He made his senior debut shortly before his 18th birthday when he came off the bench in the 9-0 Premier League victory over AFC Bournemouth at Anfield.
A first start then arrived in November in the Carabao Cup tie against Derby County, before opening his goalscoring account with an incredibly composed finish at Aston Villa a month later.
In total, Bajcetic has made 10 first-team appearances so far this season – three of which have also been in the Champions League.
“It's crazy,” the No.43 continued. “A year ago I was playing U18s football and now I've started some games, made my debut and even scored a goal – that was something I never expected to happen this year.
“It's amazing to see how fast it went. But I keep working hard and hopefully [there are] more things to come.”