The Spanish club rejected a bid from Manchester United on Tuesday for Silva, according to his agent, while Tottenham and Liverpool had also been linked.
Valencia have agreed new terms on the 22-year-old's contract.
"It's very satisfying to see the player's willingness to stay," said Valencia Vice-president Fernando Gomez.
He added: "The club will not do anything crazy or break our financial and sporting guidelines so we have gone as far as we have been able to."
"There is complete agreement between the club and the player David Silva that he will remain with us for the next five season."
"We have always expressed the hope that he will stay with us."
Valencia had negotatied a new contract with a salary increased with David Silva following a meeting with club official on Wednesday."
"This is a new contract with Valencia with different conditions," he said
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