The 20-year-old, who has made six senior appearances for the club, has been subject to much speculation surrounding a potential loan move to the Championship.
West Brom have been one of the clubs reportedly keen on taking the Villa striker on loan - but earlier this week Steven Gerrard announced his intention to have the forward in his first team squad for the upcoming campaign.
Archer, who made his debut for the club in 2019, and scored a hat-trick in the Carabao Cup against Barrow, spent last season on loan at Preston which led to his first appearance for England Under 21s, where he has netted four goals in four games.
In a statement, the club said: "Aston Villa is pleased to announce Cameron Archer has signed a new five-year contract with the Club.
"The Academy graduate made his debut for the Club in 2019 and Head Coach Steven Gerrard has confirmed the 20-year-old will play an important role in his first-team squad this season."