Last week Matawalu was named in the 2012/13 RaboDirect PRO12 dream team.
His contract was due to the expire at the end of next season but the new deal means he'll be in Glasgow for at least another two years.
Matawalu's all action style has made him a favourite amongst the supporters and his versatility means he can play on the wing as well as at number nine.
Niko Matawalu said: "I've loved my first season in Glasgow and I am really excited to have signed an extension to my contract. Everything here is so professional and it's the best place for me to continue my development.
"I've learnt so much since I came to the Warriors and my game has really improved. I like playing in the PRO12 - it's a strong league with a number of good players.
"We're a very close squad and I'm really enjoying my rugby just now. The supporters have been absolutely fantastic and I'm looking forward to playing on front of them at Scotstoun for at least another two years."
Glasgow Warriors head coach, Gregor Towsend said: "This will give everyone at the club a massive boost ahead of our semi-final this weekend. Niko is a very popular player and he's worked extremely hard since joining the club in the summer.
"He's become a real fans favourite with his style of play and we're all delighted he's staying in Glasgow."
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