The 28-year-old, who is currently the longest serving player for the Cherries, was an integral part of the side that won two promotions in their route to Premier League football.
Pugh has started six league games this season and scored his first top flight goal in the Cherries' 4-3 win over West Ham United on Aug. 22.
"It's amazing to have it all sorted," Pugh told the club's website (www.afcb.co.uk). "I've always wanted my future to be at Bournemouth -- I love the place. It ticks all the boxes for me on and off the pitch.
"The rise has been incredible. We've got a great squad and great characteristics in the dressing room -- that will take us a long way."
Bournemouth, who are second-from-bottom in the league table, will hope to get out of the relegation zone on Saturday when they host seventh-placed Everton.
(Reporting by Shravanth Vijayakumar in Bengaluru; editing by Sudipto Ganguly)
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