Howard has put pen to paper on a deal that will keep the American shot-stopper at Goodison Park until the end of the 2017-18 season.
"It is fantastic news. To have Tim Howard performing as he has been this season, I cannot see past him to choose the best goalkeeper in the league," the manager told the club's official TV channel.
"For him, in such an important year with the World Cup around the corner, to commit his future for the long term is an incredible moment for the dressing room.
"On top of his goalkeeping it's his overall demeanour and personality in the dressing room. He is a strong leader."
Everton currently occupy fifth spot in the Premier League table, with the Toffees chasing Champions League qualification.