The 24-year-old has put pen to paper on a four-and-a-half year deal which will keep him at Villa Park until the summer of 2015.
Agbonlahor has been out with injury problems this season but has proved his worth to Villa with more than 50 goals since making his debut four years ago.
Villa boss Gerard Houllier has only seen brief glimpses of Agbonlahor's potential since taking charge in mid-September.
But the former Liverpool boss has faith in the England striker along with many of the club's other rising stars.
It was David O'Leary who gave Agbonlahor his first team debut during the 2005-2006 season and he flourished under his successor Martin O'Neill.
He has proved to be a consistent marksman and, along with John Carew, has formed the bedrock of Villa's attack for the past three seasons.
Agbonlahor suffered a calf problem at the start of this season and then underwent groin surgery five weeks ago. But he finally started on the comeback trail as a substitute during the midweek 3-2 victory over Blackpool.
Houllier confirmed Agbonlahor was in contention to start Saturday's home game with Manchester United.
The striker last season scored the only goal in Villa's 1-0 away triumph over the Red Devils - their first at Old Trafford for 26 years.
Source: PA
Source: PA