The contract also contains a further year's option in the club's favour.
Myhill enjoyed a seven-game run in the first team during November and December when current number one, Ben Foster, was sidelined with a hernia problem which required surgery.
The Baggies new sporting and technical director, Richard Garlick, said: "We've seen this season, it is important to have a good number two.
"Boaz has definitely contributed to our success and stepped up to the plate when Ben Foster was injured.
"In the Barclays Premier League it is vital you have a number two you can trust in but also a number two that can push your number one.
"Everyone at the club has faith in both of them and, with Luke Daniels, we've got a good set of three keepers who push each other in training and have a good understanding with each other."
Myhill spent last season on loan at Birmingham while Foster moved to the Hawthorns in a temporary move which became permanent during thew summer.
The 30-year-old joined Albion from Hull in August 2010 and to date has won 14 caps for Wales.
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