The 24-year-old has been impressive for much of the season, forming a strong partnership with James Collins at the heart of the Hammers' defence.
The New Zealand international, who has captained both club and country over the course of the current season, has played in 33 of West Ham's 35 Barclays Premier League fixtures this season.
Reid moved to West Ham from FC Midtjylland in 2010 and played an instrumental role in Sam Allardyce's side that bounced back to the Premier League at the first time of asking last year.
Upon signing his new deal Reid said he hopes for a continuation of his previous two years in east London.
"I've really enjoyed being here," he told the club's official website. "I think I have played some good football over the last two years but that goes for the whole team as well. Hopefully we can continue that."
The new deal takes Reid up until the club's penultimate season at Upton Park before they move to their new home at the Olympic Stadium from 2016/17.
But the defender already has one eye on turning out for the club at their new ground and is excited by the prospect.
"It is an exciting time for the club," he added. "Even though it is three years down the road, they are already looking forward to seeing what can be done when we move there."