The 21-year-old, who can play anywhere down the left, has started nearly 50 games for The Foxes since making his debut in 2000.
He has become a vital part of manager Micky Adams's squad and he has now pledged his future to the East Midlands club.
The player's agent David Baldwin confirmed to skysports.com that a deal has been agreed.
"He has signed the deal and he is delighted," Baldwin revealed.
"We have been talking for a quite a while about this.
"He plays that elusive left-sided role and has been in great form.
"He always wanted to stay, he is a Leicester lad and this has always been his aim.
"He is just delighted to have signed and now can concentrate on playing."
Stewart has also landed a major deal with leading sports manufacturer Puma - who are delighted to have lured the Foxes starlet.
"Jordan is a player we have targeted, he is young, good looking and a great player," Puma's head of football Jonathan Gregory explained.
"He has a bright future and we are delighted to be part of it."