The 23-year-old was on a two-year deal which was due to expire at the end of the 2015-16 season.
But, after sending him out on loan for much of last season, Villa have opted to give him an extended opportunity.
Gardner, who is currently sidelined with injury, said: "I enjoyed my time on loan but now I'm determined to make an impact this season with Villa and show everyone what I'm capable of.
"I am delighted to extend my time with this great club. I am looking forward to working with the gaffer going forward and being someone he can turn to and do a job for the team."