The left back, who joined from Swansea City in 2014, has made 78 appearances in all competitions and scored his first goal for Spurs in an FA Cup win over Aston Villa in January.
"It’s a fantastic club to be a part of at the moment and the way we’re working on the training pitch and the way we’re playing the games you can only see it getting better,” the 23-year-old said.
Tottenham are second in the league standings but 10 points adrift of runaway leaders Chelsea. Spurs host fellow London side Millwall of the third tier in an FA Cup quarter-final on Sunday.
Davies has 28 caps and was a key member of the Wales team that reached the Euro 2016 semi-finals in France.
The Welshman, a back up for first-choice left back Danny Rose, is the latest Spurs player to sign a new deal following the likes of Harry Kane, Dele Alli, Eric Dier and Jan Vertonghen.
(Writing by Ken Ferris; Editing by Nick Mulvenney)
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