Luiz was due to be out of contract at the end of June and Arsenal head coach Mikel Arteta had urged the club to extend his deal.
The Brazilian will remain at the Emirates Stadium for at least another year.
Reacting to the deal, Arsenal’s technical director Edu said: “David is a really important player for us. He has played most of our matches this season and has been important for the team. His passing, his communication with the team on and off the pitch. He helps everyone.
“I am really happy that we will have these players in our squad for the future. They have been part of the long-term technical plan Mikel and I have developed. They bring the right balance to our squad,” Edu added.
“With Pablo, we’re all disappointed he got injured at Manchester City. Since Mikel arrived here he was asking for a central defender who was left-footed.
“We were really pleased with Pablo – his behaviour, the way he is training, his mentality and his quality. Unfortunately, he has that injury but of course we are really happy to keep him for the future.
“Cedric is also going to be an important player. He has been unlucky with the injuries but he is close to being ready and gives us more strength in the right-back position.