Under the terms of the deal the 29-year-old will remain at Valencia until 2015.
Valdez, who has been used mostly as an impact player off the bench this season, has scored eight goals in 31 appearances.
"I am happy to be staying at Valencia for two more years," he said. "The clause in the contract took effect a while ago and now it's official that I belong to Valencia,"
Valencia's next game is a Liga clash at city rivals Levante on March 2. They will seek to overturn a 2-1 deficit when they visit Paris St German for their Champions League last-16 second leg four days later.