The 22-year-old utility back has already played 114 games for the club since making his debut in 2013 and, although he still had 12 months to run on his existing deal, he is now committed to the Rhinos to at least the end of 2021.
With long-serving half-backs Danny McGuire and Rob Burrow bowing out at the end of the season, following the recent exit of Kevin Sinfield, McDermott said he is examining his future captaincy options.
"The significance of Liam signing for us is big," McDermott said. "We know all our young, quality players have a number of options to go elsewhere and the fact he has decided to stay with us is testimony to the environment that has been created at our club.
"We are excited to be working with Liam for the next four years at least and he is excited about being here.
"He has played a number of positions and offers quality at full-back, centre and stand-off and can also play in the back row. Whilst he wants to nail down a position for himself, the fact he can fulfil a number of roles for us makes him an invaluable member of the squad who will always be in the 17.
"We are currently in a transitional period and we are in a very good position within that process. We are coaching and mentoring our young people through so, by the time they need to take on the leadership of our club, they have been through a whole range of experiences with us but that only comes if you commit for a long period with us."
Leeds-born Sutcliffe has made 24 appearances out of a possible 32 so far this year in a host of different positions.
"I am really pleased to have got it all sorted," he said. "People have been asking for a few months what I am planning for the future and I have had to keep my thoughts to myself. I am over the moon to have agreed a new deal now.
"Brian McDermott and I have been talking over the last few months and the more I spoke to him, the more I wanted to commit myself to this club. I am a Leeds boy and I love playing for this club so I am really looking forward to the future.
"I am massively enjoying my rugby at the moment. We are guaranteed a home semi-final now and we are 80 minutes away from Old Trafford. Every time you pull on a Leeds shirt you want to be doing that at a Grand Final and we now have chance to do that."