Michu joined Swansea in a £2.5 million transfer from Real Vallecano in the summer and has proved a big hit in English football, scoring 16 goals in 28 games in all competitions.
His tally of 13 Premier League goals is bettered only by Demba Ba, Luis Suarez and Robin van Persie, and Michu spent much of the early part of the season playing as a withdrawn forward, rather than a central striker.
He is expected to win a call-up to the Spain squad for the friendly against Uruguay on February 6 and says he had no thoughts of leaving Swansea before committing to a new deal.
“I’m happy here," Michu told the club's official website. “I’ve read and listened to all the speculation, but it doesn’t interest me, and that's why I've signed a new contract.
"I’m enjoying myself too much because the team always tries to play football. All I think about is the next game and helping Swansea be successful. This is my life."
Michu will feature for Swansea on Wednesday night when they take on Chelsea in the second leg of their Capital One Cup semi-final having won the first leg 2-0 at Stamford Bridge.
“I am living a dream here at Swansea," he added. "I’m probably enjoying my football more than ever. It’s easy to play with this team and tonight I have the chance to reach the first final of my career.
“I’m really happy here in the city with the people, the club and the fans. Everyone has been so nice to me since I arrived.
“I think the club are happy with me because they have given me a new contract. I am certainly happy with the club.’’