The 28-year-old has become a first-team regular under head coach Gary Gold, who is delighted to have retained the player's services.
"Flo is truly a world-class player, and the fact that he was so keen to stay with us says great things about what we are working to create here," said Gold.
"He could have chosen his club, and he chose to stay with us. We are delighted to have him on board."
Louw, who has 19 international caps to his name, joined Bath in 2011.