The United States international has been first-choice under David Moyes since arriving from Manchester United, initially on a season-long loan, in 1996. Howard, 33, has made 256 appearances for the Toffees in that time.
"I couldn't be happier. I've had a smile on my face ever since we finalised the deal," Howard told evertontv.
"When you have a really good relationship in life and both sides are eager to continue and keep that going, it's a no-brainer.
"This hasn't been a knockdown, drawn-out type of negotiation with meetings or anything like that.
"They were very happy to keep me here and I was very happy to stay.
"It's a place that is home for me."
This season Howard moved ahead of Neville Southall in the Everton Premier League appearance chart and also scored his first professional goal, in the 2-1 defeat to Bolton in January.
Source: PA
Source: PA