The Frenchman initially moved to Craven Cottage on loan for the 2019-20 season, during which he has scored three goals in 28 appearances.
He has now not committed his long-term future to Fulham, signing a contract until 2023 with the option of a further year.
“I’m happy to continue the adventure with Fulham for three more years,” Knockaert told the club’s website.
“I’m really excited for the remainder of this season and hopefully we can achieve our goal of being promoted to the Premier League.
“I’ve had a good time here since I joined the club and I’m looking forward to the future.”
Knockaert helped Brighton secure promotion to the Premier League three years ago, having also done the same with Leicester City earlier in his career.
“The move has worked out well for Anthony, and I would like to wish him well for the remainder of the season and for the future,” Brighton head coach Graham Potter said.
“There’s no doubting his contribution to this club, as part of the promotion-winning team in 2017, and those first two seasons in the Premier League.
“On behalf of everyone at the club I would like to thank him for his achievements.”
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