The new deal will keep the 28-year-old at Ewood Park until the summer of 2014.
“I’m delighted that Morten has signed a new four-year contract,” Rovers chairman John Williams told the club’s official website.
“What appeared to be a lengthy negotiation was always carried out in a positive, constructive manner with Morten making it clear that he wanted to stay.
“Sam (Allardyce) is currently on holiday but he’ll be delighted, he made this, together with finding a striker, our summer priority.
“He regards Morten as a key member of the squad and his future at Ewood Park is now secure.”
“Blackburn always was my first choice. We have a united team, great management and brilliant supporters,” Pedersen said.
“Also, there aren’t many footballers who get the opportunity to stay with one Premier League club for 10 years.
“I did and I want to honour that.”
