The Longsight-born striker, 21, has made 64 appearances for United, scoring 17 goals since his debut against Middlesbrough in the League Cup in September 2008.
Sir Alex Ferguson is delighted to have secured the striker's services for another four years.
"Danny has been with the club since he was eight years old and has made fantastic progress in the last couple of years – first out on loan and last year as a regular in the first team," the manager told ManUtd.com. "He has become an important player at international level as well, as the maturity of his performances at the European Championships showed. This year is another important one for him. He has a bright future ahead of him.”
Welbeck himself added: “Playing for United is all I’ve ever wanted to do – it’s the club I’ve supported all my life. I can’t wait for the challenge of the new season to play my part in helping the team compete for trophies. I’m learning all the time from the best manager in the game and I’m keen for that to continue alongside the world class players in the squad.”