"Northampton is my home town and it's an honour to play for Saints and pull on their jersey every week. I can't imagine playing for another club," he said.
Thompson, a converted flanker, has been a vital member of Saints' squad since making his debut in 1997 and is the current club skipper - an honour he initially landed midway through last season.
The 27-year-old - widely considered the best hooker in the world - travelled to New Zealand with the British & Irish Lions over the summer, making two appearances against the All Blacks. He has accumulated 39 caps for England.
"I can't wait to get started this season and I'm grateful to the club for giving me some time off. I feel refreshed after the Lions tour and have enjoyed getting slowly back into training," said the World Cup winner.
"There have been a few changes while I've been away with the signing of some exciting new players and the extension to Franklin's Gardens.
"As soon as I'm given the nod, I'll jump at the chance to play alongside these players and to run out in front of a capacity home crowd."
Director of rugby Budge Pountney expressed his delight at Thompson's decision to pledge his future to Saints, who narrowly escaped relegation from the Premiership last season.
"Steve has been fantastic for this club and will continue to be so. Both parties have committed to a long relationship and one that we hope will be fruitful and enjoyable," he said.
Meanwhile, Welsh prop Simon Emms undergoes surgery on his bicep injury on Thursday with the recovery expected to take between six and ninth months - potentially ruling him out of the rest of the season.