The England international joined the Saints from Celtic in 2014 and has been impressive on his return from a serious knee-injury this season, keeping six clean sheets in a row.
Forster broke a Southampton record after going 708 minutes without conceding a goal, the longest run in the club's top-flight history.
"Since his arrival in 2014, Fraser has proved himself as one of the best goalkeepers in the Premier League, and has been an integral part of the club's success over the last two seasons," Les Reed, Southampton's executive director of football told the club's website. (www.saintsfc.co.uk)
"At 28, Fraser will only get better and we firmly believe he will be a key factor in the club's future success and of the national team's plans for many years to come."
The club also announced a contract extension for midfielder James Ward-Prowse, who signed a six-year deal.
The England Under-21 captain and Saints' academy graduate has made 32 first-team league appearances under manager Ronald Koeman this season.
"I'm delighted. When I knew I had the chance to extend my stay here it was a no-brainer for me," Ward-Prowse said.
