The 24-year-old playmaker's existing contract was due to expire next year, but he has now committed himself to the recently promoted Foxes.
Drinkwater, who joined from Manchester United for an undisclosed fee in January 2012, played a key part in Leicester's promotion to the Premier League, with his performances seeing him named in the PFA's Championship team of the season, along with team-mates Kasper Schmeichel and Wes Morgan.
He told the club's official website: "I'm absolutely delighted to commit my future to Leicester City.
"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."