The 22-year-old - who will be England's third-choice keeper for this month's games against Lithuania and Italy - has committed until the summer of 2019.
Asmir Begovic remains Stoke number one but Butland, who joined the Potters from Birmingham for £4million two years ago, is a key part of manager Mark Hughes' plans.
Chief executive Tony Scholes told the club's website, stokecityfc.com: "I'm delighted that Jack has decided to extend his contract with us
He's a player that Mark Hughes holds in very high regard and (England manager) Roy Hodgson's decision underlines his standing in the English game.
"Jack is a very ambitious young man and wants to play first-team football on a regular basis for Stoke City.
"There's genuine competition for the goalkeeping spot at the club with Asmir Begovic, Jack and Thomas Sorensen, and Jack has made no secret of his desire to be our number one."
Butland will link up with England Under-21s during the forthcoming international break but will be elevated to the senior squad if Joe Hart or Fraser Forster suffer injury.
Butland has made just seven senior first-team appearances for Stoke, with five this season in domestic cups
He also had a loan spell at Derby earlier in the campaign while he spent time at Barnsley and Leeds last season.
Source : PA
Source: PA