The 26-year-old left-back, who was born in Newcastle, has been with the Magpies since the age of nine, progressing through the ranks to make more than 100 appearances for his boyhood club.
Dummett made his senior debut for United in January 2013 following successful loan spells with Gateshead and St. Mirren, and was a virtual ever-present as Rafa Benítez's side won the Sky Bet Championship title last season.
He suffered a hamstring injury on the opening day of the current campaign but since his return to action, Newcastle have won three and drawn four of their last nine games - only losing twice to league leaders Manchester City - and conceded just eight goals in the process.
Manager Benítez said: "If you talk about players that are important for the team, normally people talk about goalscorers, midfielders and number tens but in modern football, there are not too many consistent left-sided full-backs.
"Paul is exactly that; he understands the game and you know what you can expect from him week in, week out. That's important when you have a lot of big games. He's a player you can trust.
"He was unlucky to miss the first four months of the season through injury, but he's a player who is quick to learn and knows his job really well. His return has given us more competition in a position where we did not have too much before, so we're really pleased to keep him."
The new deal could run to the summer of 2022.
Dummett told NUFC TV: "It's my boyhood club and I've been a supporter for many years so to extend my stay at the club for even longer is really important to me.
"I've always wanted to stay here and the manager and the club have wanted to keep me so I'm really pleased to have signed the new contract and hopefully there are many more years to come."
You can watch an extended interview with Paul Dummett on NUFC TV here