The 29-year-old, who arrived at St. Mary's Stadium from Hull City in 2014, has committed his future to the south coast club until 2020.
The Republic of Ireland international scored 13 goals in all competitions for the Saints last season and is central to new manager Claude Puel's plans for 2016/17.
Reed told the club's official website: "Shane has been an important asset to the team ever since his arrival at the club in 2014, and he was an influential part of our record-breaking Premier League campaign last season.
"His experience and character also make him an extremely valuable member of the squad off the pitch, as well as on it, and I am delighted we have strengthened our commitment with him.
"Shane is the latest in a significant number of first-team players to have signed new contracts with the club in recent weeks and months, indicating the players' belief that there is more to come, while further strengthening the core of our squad, as we move into what promises to be another memorable campaign.
"Shane is one of many exciting attacking options that we have at our disposal, and he will no doubt play an important part in the season and the years ahead."
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