The Saints skipper came through the academy and has made 278 first-team appearances for the south-coast outfit.
“I have said before that Prowsey is a player who shows everything that Southampton Football Club is about," Hasenhuttl told the club's website.
“It is not only his story of being developed as a player here, but also the commitment and attitude he shows in his work. He was not playing so much when I arrived, but he has listened and worked on every aspect of his game, and that is why he has reached the level he is now at.
“He has a passion for the club that everybody knows about, and he is respected by everyone here. I know he is a role model for our younger players especially, and these are all reasons why he was the right choice to be a long-term captain of this team and this club.
“He deserves congratulations for this contract and this is very good news for our team and our club."