Ward-Prowse has been at Southampton since the age of eight and made his debut for the club in October 2011.
The 25-year-old former England under-21 captain has made 278 appearances for the South Coast club, scoring 24 goals.
Ward-Prowse played every minute of Southampton’s Premier League campaign last season as Ralph Hasenhuttl’s side finished 11th on the table.
Ward-Prowse was named Southampton’s captain in June after Pierre-Emile Hojbjerg, who has since joined Tottenham Hotspur, was stripped of the captaincy.
After signing his new deal, Ward-Prowse said: "I think everybody knows it's a club that's very close to my heart. I started out here as an eight-year-old and just had that goal of wanting to reach the first team.
"My appreciation for the club is so big because the people within it and the infrastructure has allowed me to follow my dream as a young boy who wanted to play professional football.
"I really feel that it's an exciting period for us. I think we've regained our identity as a team and I think we're heading in the right direction towards where we believe we can go as a club."
Manager Hasenhuttl added: "I have said before that 'Prowsey' is a player who shows everything that Southampton Football Club is about.
"It is not only his story of being developed as a player here but also the commitment and attitude he shows in his work.
"He was not playing so much when I arrived but he has listened and worked on every aspect of his game, and that is why he has reached the level he is now at.
"He has a passion for the club that everybody knows about and he is respected by everyone here. I know he is a role model for our younger players especially and these are all reasons why he was the right choice to be a long-term captain of this team and this club.
"He deserves congratulations for this contract and this is very good news for our team and our club."
Ward-Prowse has been capped twice by the England national team.
