Grealish was subject to interest from Tottenham over the summer, but Villa rejected a £25m bid after new owner Nassef Sawiris insisted Grealish was not for sale.
The 23-year-old, who had two years remaining on his old contract, was said to be “disillusioned” by the decision, while Villa boss Steve Bruce confirming the move would have gone through had Spurs acted earlier in the window.
Bruce went on to praise the player’s “fantastic” attitude a week after Deadline Day in August, and the improved terms reflect his importance to the club, for whom he has started every Championship game so far this season.
“We keep hearing that footballers don’t want to play,” Bruce said back in August. “Jack’s knocking on my office at ten past nine demanding that he plays.
“Typical Jack. All the stories you hear about him, one thing I can tell you is that he wants to play.”
Bruce had admitted Grealish was likely to be sold to ease financial worries at Villa before the club’s new owners arrived in July with fresh investment.
Sawiris and Wes Edens bought a 55 per cent stake to stave off the threat of administration after Villa lost the Championship play-off final 1-0 to Fulham in May.