The highly rated teenager, whose previous contract was set to expire at the end of the season, had been heavily linked with a move to Roma in January after the Serie A club's sporting director Walter Sabatini made their interest public last month.
However, Rabiot put pen to paper on a four-year extension to his deal with PSG on Friday, keeping him at the Parc des Princes until 2019.
And the French midfielder, a product of the Ligue 1 champions' youth system, is delighted to be staying put.
"I am very happy to remain a player of Paris Saint-Germain, the club that made me the player I am today," the 19-year-old told PSG's official website.
"I would like to thank the president [Nasser Al Khelaifi], who kept discussions open in recent months.
"It was here at Paris Saint-Germain that I grew up and enjoyed my first experiences as a player. The club's project is ambitious, and I'm very proud to be a part of it for the coming years.
"Now I want to concentrate on my football, on my game and give my best for Paris Saint-Germain on the pitch and for the supporters."
Rabiot, who made 25 Ligue 1 appearances last term, has been restricted to reserve-team football so far this season, due to a combination of injury and the uncertainty surrounding his future.
However, the France Under-21 international will hope to force his way back into Laurent Blanc's first-team plans now he has committed to PSG.