The Bermudian frontman put pen to paper on the deal after training on Friday to end the uncertainty over his future.
Wells, whose current contract was up in the summer, scored twice in the midweek win over Burton and has scored five goals for the Bantams this season and his new contract will tie him to City until 2015.
Wells told the club's website: "I always wanted to stay at Bradford. I felt this was something that was always going to happen, we just needed everything to be right for both parties."
Boss Phil Parkinson was delighted to get the 22-year-old tied to a long-term deal.
He said: "We're really pleased. We want to keep our best young players and Nahki is certainly one of those. He is a talented player and his biggest attribute is his ability to finish with both feet. He is a cool finisher.
"He's made really good progress in the last 12 months and I'm confident he will keep improving as a player."
The new contract replaces his current one and ties Wells to the club until the end of June 2015.