Caicedo was the subject of a £60 million bid from Arsenal late in the January transfer window, sources told ESPN.
However, Brighton held firm in their stance that the Ecuador international would not be allowed to leave the club that month, despite Caicedo publicly declaring that he wanted to be able to “take up this magnificent opportunity.”
He was subsequently given time off before returning to be a key player as Brighton have continued a fine season that sees them lying eighth in the Premier League standings.
The new contract ties the 21-year-old to Brighton until 2027, with a club option for an extra year.
“This is a fantastic news for the club, our fans, for me and most importantly for Moises,” Brighton head coach Roberto De Zerbi said. “It will make us stronger as we move forward towards our targets on the pitch.”
Caicedo joined Brighton from Ecuadorian side Independiente del Valle in February 2021, before spending the first half of the following season on loan with Belgian outfit Beerschot.
As well as excelling in the center of Brighton’s midfield, he played in all three of Ecuador’s matches at the 2022 World Cup in Qatar.