The 21-year-old, whose existing deal was due to expire next season, has penned a contract until the summer of 2023 to end speculation over his future.
Academy graduate Rashford has been at United since he was seven, making 170 appearances for the club.
Ole Gunnar Solskjaer has earmarked the Wythenshawe-born striker to lead the line next season, having impressed in the early months of the Norwegian's reign.
Rashford believes Solskjaer and his staff have already had an impact on his game and he is determined to repay them by taking the club back to "where it belongs".
"Manchester United has been everything in my life since I arrived here at the age of seven. This club has shaped me, both as a player and as a person, so it is such a privilege every time I get the opportunity to wear the shirt," he told United's official website.
“I want to thank Ole and his staff for everything they have done for me; they are the perfect group of coaches to learn from as I continue my development and look to push on to the next level.
“I will be giving everything I have to help get this club back to where it belongs and deliver the success that our fans deserve.”
United have already lost Ander Herrera on a free transfer this summer, while David de Gea and Paul Pogba are both considering their own futures.
But Solskjaer is pleased to get Rashford's future committed to the club, hailing his desire to play for United.
"Marcus is one of the most talented English players of his generation. He is an outstanding player; blessed with natural pace and energy," said Solskjaer.
"Marcus is a shining example of the talent that our Academy produces and his upbringing means that he truly understands what it means to play for Manchester United.
"Despite being only 21 years old, Marcus already has great experience. He has a fantastic future ahead of him with the club and I am delighted that he has signed a new contract."
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