The 20-year-old Saints academy graduate has been a regular under boss Ronald Koeman since returning from a foot injury earlier this season.
Ward-Prowse's new deal will run until the summer of 2020
And he has been rewarded for that form in the shape of a new deal, which will keep him at St. Mary’s until the summer of 2020.
"He's one of the young players who is developing himself in a very good way, he will be a great player," said Koeman, following Friday's news from the south coast.
"It's always good news, I'm happy that he would like to stay with us. It's a good signal to the rest of the players.
"He's one of the examples for the academy, to the confidence of the young players.
"Prowsey developed in the academy and now he's one of the young players who plays for the first team.
"He's a good professional, always serious in his training, in his discipline, he's a big example for all young players."
Ward-Prowse has been with the club since he was eight and came through the ranks before making his debut as a 16-year-old in a League Cup tie with Crystal Palace in 2011 before his Premier League bow came against Manchester City on the opening day of the 2012-13 season.
See James Ward-Prowse show us his set-piece techniques on the training ground
And he spoke of his joy at extending his time with the club, who currently sit in third spot in the table after an impressive first half of the season.
"The club is in a fantastic position and ever since I joined the club at a young age, I knew it was the right place to be," Ward-Prowse told Southampton's YouTube channel.
"I fell in love with the place straight away.
"I've been on a fantastic journey, the club has too, and it's great to extend my stay. I'm really excited for the next few years.
"You only have to look at the players we've produced over the last few years to see it is the right place."
The Portsmouth-born ace has also been a regular in Gareth Southgate’s Under-21s side, where he has been vice-captain throughout the Euro Qualifiers for this summer's Euro Finals in Czech Republic.
