The 23-year-old's previous deal was due to expire at the end of the 2014-15 season but has now been extended by a further two years.
"I am really enjoying my football here," Cresswell told the club website. "There is a good feel about the place and it's enjoyable coming to work every day.
"I feel I have progressed as a player and like any professional, I want to get to the top and that means playing in the Premier League. Hopefully I can do that with Ipswich."
Cresswell has been linked with a number of Premier League teams, most recently West Bromwich Albion, who will reportedly make a move for him in January.
He is the Championship's leading assister this season having set up eight of the Tractors Boys' goals.