Ward-Prowse, 18, made his top-flight bow on the opening day of the season and has gone on to play 10 games so far this term.
His performances have led to claims that he could be the latest Southampton Academy product to be tempted away from Saint Mary's Stadium, but he put a stop to that speculation when Saints announced the midfielder had signed a new deal.
A statement on Southampton's website read: "Saints are delighted to announce that James Ward-Prowse has signed a new five-year contract."
Ward-Prowse grew up as a Portsmouth supporter, but joined Pompey's south coast rivals as an eight-year-old.
The midfielder impressed through the youth ranks at Saints and made his first-team debut a week before his 17th birthday last season.
Manager Nigel Adkins deemed the teenager ready for top-flight football at the start of the season, and he has been one of the few success stories at the struggling club so far this term.
Ward-Prowse, who played a key part in Southampton's win over QPR on Saturday, told the club's website: "I'm absolutely delighted. It was nice that we got the win on Saturday, and it's nice to put pen to paper. I can kick on from here.
"That's been my dream since I was a young kid, so to get to that stage is fantastic. My short-term aim now is to get back into the team. There's a lot of competition for places now Corky ( Jack Cork) is back because he's done well in the last two games."