"We knew we needed to talk with a number of our players and Pepe was one of them," said the Liverpool boss.
"He's had two good years with us and because of his age we knew we had to sort out a long contract. I'm really pleased that he has signed and I think it sends out a message to everyone that we are preparing our team for both the present and for the future.
"Pepe's record at Liverpool is very good. He's had a lot of clean sheets and you can see the confidence the defenders have in him. When he plays the defenders look very comfortable and that is so important.
"I've said before that he's the best goalkeeper in Spain but he's also one of the best in the world. In this country there are a couple of goalkeepers at the very top level and he is one of them."