The New Zealand international, 23, earned the Town Supporters' Player of the Year award this season and manager Mick McCarthy has moved to extend his stay.
Smith told Ipswich Player: "I'm delighted to extend my stay at Town. It's great that the club have shown loyalty with me and that I've shown my loyalty to the club as well.
"I've been here since I was 16 years-old and I love the club. Hopefully I can be here for a few more years to come and we can be successful.
"The club means a lot to me and I've developed a great relationship with the fans. It's also great to see players coming out of the Academy and into the first-team, like myself, Luke Hyam and Josh Carson."