Westwood joined Villa from Crewe last August and went on to make 30 Premier League appearances for the midlands outfit during the 2012-13 campaign.
"This time last year I was still on pre-season with Crewe and now I'm signing another contract at Villa, it's a fantastic feeling for me," the 23-year-old told Villa's website.
Westwood had already been contracted to Villa through to 2016 from when he completed his move to them on transfer deadline day last summer, and this extension to 2017 is testament to how impressed boss Paul Lambert has been with the performances the Nantwich-born player has put in since then.
"I think a lot gets overlooked with Ashley but he has just come in here and has taken to it no problem whatsoever," Lambert said.
"He was captain at Crewe and played a lot of games in men's football before he came here, so he knew what it was about.
"If you look at the stats regarding his passing, they are terrific, something like a 91 per cent success rate. He never seems to give the ball away. He's been exceptional."