The 21-year-old joined the club from Nigerian amateur side My People in 2011, and appeared in 29 Serie A matches in 2013-14, scoring one goal.
With his initial deal set to expire at the end of next season, the Nigeria international has agreed improved terms as Lazio look to warn off potential suitors, with the likes of Everton and Southampton reportedly interested during the recent transfer window.
"I give God the glory and special thanks to everyone involved in sorting out this new deal," Onazi told BBC Sport.
"It's important to know that your future at the club is sorted; I've always insisted that I love it here and I'm delighted to stay.
"My focus and desire is to give my best in the club colours and continue to enjoy the love and warmth of our fans.
"As a young footballer you learn every day, work tirelessly and seek to improve.
"I have the players, staff and the needed support to grow here."