The 21-year-old, who has been at the club for 14 years and progressed through the academy and into the senior United and England sides, told the club's website: "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.
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“I want to thank [manager] Ole [Gunnar Solskjaer] 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.”
Despite being linked with moves to multiple other clubs - including Barcelona - in recent months, Rashford has committed to his boyhood club and has the option to extend the deal by another year.
Solskjaer added: "Marcus is one of the most talented English players of his generation.
He is an outstanding player; blessed with natural pace and energy.
"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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