The Australian finished as the Clydesdale Bank Premier League's top scorer in his first season with Celtic, who he joined from Motherwell in a £700,000 deal last summer.

His 25 league goals helped Gordon Strachan's side clinch the SPL title and reach the last 16 of the Champions League.

Celtic were keen to reward McDonald for his contribution and the 24-year-old was eager to stay with the club.

Chief executive Peter Lawwell told www.celticfc.net: "This is great news for Celtic.

"It is well known that Scott loves playing for Celtic and he has a great affection for the club. He is also someone who performed brilliantly for Celtic last season.

"Our priority is always to keep our best and most committed players and the board is delighted to support Gordon in his plans for the future by securing Scott on this long-term agreement.

"We will continue to do all we can to ensure that Celtic stays at the top of Scottish football."

McDonald's goals in his first campaign at Parkhead were crucial as Celtic surged past Rangers in the final quarter of the season to complete a hat-trick of league title triumphs.

He exceeded most expectations with his goals return, and the new contract will reflect his status as a key man in Strachan's side.

The Australian last week admitted his second year as a Celtic player will present a different type of challenge.

McDonald said: "Probably coming to the start of the second season, I am going to have even more of a point to prove that it was not just a one-off season that I had.

"You've got to go out there and do it again and if I can do that, it could be the making of me. Hopefully that is the case and there are many more good times to come."

McDonald has admirers in England, despite failing to make the grade at Southampton, but his long-term future lies at Celtic.

He totalled 31 goals in all competitions last season and is hoping to make a similar contribution in the upcoming campaign.

"It's probably going to be doubly hard," he said last week, "but it's something I am going to look forward to and hopefully we can go out there and win another championship and a few more trophies next season."

The announcement of McDonald's deal comes at a time when Celtic are set to lose out to Rangers in the race to sign Burnley striker Kyle Lafferty.

Both Old Firm clubs have been keen on the 20-year-old Northern Ireland striker who is expected to clinch a move to Ibrox.