Bishop made his first appearance for the Welsh outfit at 19 years of age and has gone on to help Ospreys clinch four league wins and the EDF Energy Cup in 2008.
"I'm really happy about this," Bishop told the club's official website. "It's great news, I want to stay with the Ospreys which is a great place to be and is where I've played all my senior rugby.
"There's a very good squad here with competition for places right through it. There are a huge amount of youngsters in the squad, so I'm in a strange position where at 27 I'm one of the oldest backs here.
"It's an honour to be able to take a senior role in the group and to help the young players coming through. It's something I really enjoy doing and I take great pleasure from seeing how well these guys do as they come through into the team."
The 27-year-old has made the most appearances for the club with 188 games under his belt.