The striker, 29, is the Championship's top scorer this season with 29 goals.
Murray, who moved to Palace from fierce rivals Brighton on a free transfer in the summer of 2011, was reportedly a target for Aston Villa and Fulham.
But Eagles manager Ian Holloway revealed at his pre-match press conference that Murray has agreed a deal to stay at Selhurst Park until 2016.
He said: "Glenn Murray has agreed a new three-year contract with us which is great news for this club."
- Sports & Recreation
- Aston Villa