Forster has signed an improved deal which will keep him at the club until 2010.
The 20-year-old, who has been acting as back-up to Steve Harper in recent weeks with Shay Given recovering after groin surgery, has made an impact in the reserve team this season.
"I have worked hard at my game over the past couple of years and I definitely feel an improvement.
"It's nice to hear other people say that I am the club's most-improved player, but I know there's still plenty of work to be done and I am looking forward to doing that with the people at this club."
Manager Kevin Keegan was delighted to have tied up another of the club's promising youngsters.
He said: "Fraser has come on in leaps and bounds and could become an outstanding goalkeeper.
"He has worked extremely hard and I was very keen to get him under contract.
"We will look for him to continue his development here and there is no reason why he can't go on to represent his country at under-21 level."