The 36-year-old's previous deal was due to expire at the end of the 2013-14 season.
Club captain Davis has made over 280 appearances for the Saints since joining them from Sunderland in 2006.
He was a key figure during their 2012-13 season, which saw them achieve promotion to the Premier League and earned him a place in the Championship team of the season.
However, he has only made nine appearances this campaign due to competition from Artur Boruc and Paulo Gazzaniga.
"When I first came to this club, to say that I would have been here for this period of time is something that I would have dreamed about," Davis told the Southampton official website. "For that dream to have materialised and for me to be feeling good is something I am really, really pleased with."
Manager Mauricio Pochettino said: "As club captain, Kelvin plays an extremely important role at Southampton.
"His presence in the dressing room is second to none, and his experience has proved to be vitally important to the Club as we look to achieve our aims.
"He has been a massive part of this club during his six-and-a-half years here, and there are few things in football that he hasn't seen so far in his career.
"Every successful team needs to have characters and people like Kelvin, so I'm delighted that he has committed himself to the club for a further three-and-a-half years."