The 24-year-old's current contract was due to expire at the end of next season, but he has now committed himself to the club until the end of the 2017-18 campaign.
Drinkwater has impressed for the Foxes since joining the club in January 2012 and was one of three Leicester players named in the PFA's Championship Team of the Year last season.
"I'm absolutely delighted to commit my future to Leicester City," Drinkwater told the club's official website.
"The club and the manager have shown a lot of faith in me since I joined and I've never enjoyed my football more than I did last season.
"It's an exciting time for the club, going back into the Premier League. We've worked extremely hard to get there and I'm really looking forward to being part of the journey in the next four seasons as we look to establish the club back in the top flight."
Leicester were promoted to the Premier League last season having cruised to the Championship title.