The 21-year-old's new deal at Villa Park is due to expire at the end of the 2015-16 season.
Gardner, who has been plagued by injuries in recent years, spent part of the last campaign on loan at Sheffield Wednesday.
"For me, it shows how much the club cares about me and sees me as a central player in the future," he told Villa's official website.
"The manager and other people at the club believe in me and know what I'm capable of. I want to be a big player for the team next season and I'm going to work as hard as I possibly can to demonstrate the potential they see in me."
Gardner made his first-team debut for Villa three years ago.