The Northampton-born winger has been at the club for his entire professional career, next year will mark his tenth year with the Saints.
The 27-year-old is the only Saints player to score four tries in a single Heineken Cup match, and after 138 appearances he made no hesitation in re-signing for the club.
"I've been here a long time now - 10 years next year - and I'm settled here," he said.
"It's a bit of a cliché but you always want to play for your hometown club and the Saints is a great club to play for. The fans are amazing, we've got a great bunch of lads playing here and I don't think there's a better club to be at in the Premiership.
"Playing in a Heineken Cup final was brilliant, as was winning the Challenge Cup, and the promotion year was pretty good, too. We learnt a lot and a lot of the structure was put in place for what's come since.
"Now we've got the most competitive squad that I've been a part of. It doesn't matter what your name is, unless you're performing you won't be in the team. It drives my standards up and puts pressure on you to perform every week.
"As far as the future's concerned, we've been close for the past couple of years, but I think that we can take the next step and win some major silverware."
Director of rugby Jim Mallinder said: "Paul is a wholehearted player who gives a hundred percent for the team on a Saturday.
"He has also shown his qualities on the pitch on many occasions since I've been at the club - he reads the game well and knows where the try line is. You can also tell it matters to him that he is representing his hometown club and that is something that is important to have in a squad."
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