The 19-year-old left-back is widely regarded as one of the most exciting young talents in the Eredivisie, and was included in the Holland squad for the European Championships last summer.
As the youngest player to appear in the tournament in Poland and Ukraine, Willems was tipped for a bright future in the game, and has reportedly been on the transfer radar of Citizens boss Roberto Mancini, who wanted to bring the Dutchman to the Etihad Stadium at the end of the season.
However, Manchester City's hopes of securing the defender's signature now look to have been dashed, after he signed a new deal that will keep him at the Philips Stadion until 2017.
"When I came here from Sparta Rotterdam I had not achieved anything," Willems told PSV's official website. "Now I have already played at the European Championship."
Willems had to bide his time after arriving in Eindhoven in 2011, but made his first-team breakthrough following injuries to Erik Pieters and Abel Tamata.
Now, under the stewardship of Dick Advocaat, PSV are second in the Eredivisie table, three points behind leaders Ajax, whom they play this weekend, and Willems is hopeful of his team-mates' chances of claiming the Dutch top-flight title.
"First we have to win on Sunday against Ajax," he added.